Chinese smart EV maker Nio has received government approval to build a third factory in the country, Reuters reports, citing sources familiar with the matter.

The factory would boost its total approved annual production capacity to 1 million cars, bringing it close to Tesla’s Shanghai facility – its largest plant globally – which has production capacity of around 1.1 million vehicles per year.

The new plant, dubbed ‘F3’ will have a 100,000 unit annual capacity on a one-shift basis, though the firm received approval for 600,000 unit capacity. It did not answer the news agency’s questions of whether F3 would be expanded to accommodate 600,000 units.

Construction has reportedly already started, and when completed will produced vehicles for Nio and its new affordable car brand Onvo.

Speaking to Reuters, Nio said: "The capacity of our existing plants won't be enough to meet market demand. There is no overcapacity with Nio.”

The EV maker, like other Chinese automakers, has been making inroads into Europe, marked most recently by its Smart Driving Technology Center outside of Berlin, Germany, earlier this year.