BEIJING, June 14 (Reuters) - Shanghai is allowing 10

Tesla vehicles to carry out tests of the company's most advanced

autonomous driving software to pave way for its rollout in

China, local-government-backed The Shanghai Observer said on

Friday.

A successful rollout of its Full Self-Driving (FSD)

software would allow Tesla to better compete with local rivals

in China, and could turn the world's largest auto market into a

battlefield for less expensive driver assistance features,

intensifying a price war.

Tesla has been offering FSD for subscription in China for

four years but with a restricted set of features.

In April, the automaker's CEO Elon Musk paid

an unannounced visit

to Beijing, where he was believed to discuss the rollout of

FSD. In May, Reuters reported that Tesla is preparing to

register FSD

with authorities in China in the run up to its planned

rollout of this year.

The same month, Chinese state media said Tesla has

broken ground on a factory in Shanghai to make its Megapack

energy storage batteries, while hailing the company's commitment

to investing in China.

The financial hub's Nanhui New City will "strengthen and

supplement the chain" around Tesla's energy storage to enhance

the concentration of the energy storage industry, The Shanghai

Observer said.

Tesla has also signed a contract with Shanghai Lingang

to achieve local commercialisation, it added.