SHANGHAI (Reuters) - Shanghai will accelerate efforts to cancel restrictions on foreign investment in the auto manufacturing sector, a government official said on Wednesday, a day after Tesla TSLA.O said it would build a wholly owned auto plant in the city.

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Earlier this year, China said it would scrap foreign ownership caps for companies making fully electric or plug-in hybrid vehicles in 2018 and all automotive ventures by 2022. The announcement marked a major policy shift in the world’s top car market that has capped foreign ownership in the sector at 50 percent for over two decades.

Huang Ou, deputy director of the Shanghai Commission of Economy and Information Technology, told reporters at a press conference that the city government was engaged in preparations to support the Tesla project, set to be Shanghai’s biggest foreign-invested project.

“The next step is for the city government to do the support work to allow the project to go into operation as quickly as possible,” he said.

“In line with state plans, we will speed up the cancellation of foreign ownership restrictions in the car manufacturing sector,” he said.

Huang declined to comment, however, on the size of the project or when the construction of a plant with capacity to produce 500,000 Tesla battery electric cars a year - large by auto industry standards - would start.

Tesla Inc TSLA.O Chief Executive Officer Elon Musk landed a deal on Tuesday to build a new and wholly owned auto plant in Shanghai, the company's first factory outside the United States. It would double the size of the electric car maker's global manufacturing.

The deal was announced as Tesla raised prices on U.S.-made vehicles it sells in China to offset the cost of tariffs imposed by the Chinese government on U.S. imports in retaliation for U.S. President Donald Trump’s heavier duties on Chinese goods.

An auto assembly plant half the size of the envisioned Tesla Shanghai plant would normally cost $1 billion to build, according to automotive industry officials and experts.

The Shanghai government said in a statement on Tuesday it welcomed Tesla’s move to invest not only in a new factory in the city but in research and development.

Chinese magazine Caijing, citing sources close to the project, reported on Tuesday that the plant’s exact location had not been decided and construction would start early next year.