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. (Reporting by Ella Cao, Zhang Yan and Ryan Woo Editing by Jason Neely and Peter Graff)