Tesla Model 3

Tesla has halted plans to purchase land for the expansion of its manufacturing plant in Shanghai in order to make it a global export hub, reports Reuters. The pause was due to uncertainty from growing tensions between the United States and China, the news wire was told by people familiar with the matter.

The California-based electric vehicle maker now intends to limit the proportion of its output from China in its global production, two sources told Reuters, as 25% tariffs electric vehicles imported from China have been imposed in addition to existing levies, put in place by former US president Donald Trump.

Tesla had previously considered increasing exports of the made-in-China Model 3 to more markets including the United States, Reuters quoted two sources as saying. The EV maker currently exports the China-made Model 3 to Europe, where Tesla is building a production facility in Germany. Last November, the carmaker received approval to sell the Shanghai-built Model Y in China.

Tesla Model Y

In March, Tesla refrained from bidding on a plot of land opposite its current plant as the carmaker no longer planned to significantly increase its production capacity in the country for the time being, three sources told Reuters. Tesla said to the news wire that its Shanghai factory is “developing as planned”.

The Shanghai city government did not respond to Reuters‘ request for comment, the news wire reported. The carmaker had never declared intention to acquire the land opposite the 80-hectare plot of land its current facility resides on, and the additional real estate would have enabled Tesla to increase production capacity by another 200,000 units to 300,000 cars, two sources said.

The Tesla factory in Shanghai has an annual production capacity of 500,000 vehicles, of which 450,000 units are production capacity for the Model 3 and Model Y. The brand sold 25,845 China-made cars in April, both in China and overseas, or down from 35,478 units sold in March, according to data from the China Passenger Car Association, Reuters noted.

Tesla Model 3 Dual Motor in Malaysia

Construction documents posted to a Chinese government website in March show that Tesla is revamping its Shanghai facility to add production capacity, Reuters wrote. The carmaker has land to spare, though that is currently used for parking at its Shanghai location.

A source told the news wire that Tesla could grow its capacity to beyond 500,000 units from its existing site, while another source said that Tesla might acquire more land for even more production lines in the future. In April, the American EV maker planned to add facilities to its Shanghai plant to accommodate repairs and reproduction of key parts such as motors and battery cells.

In January, Tesla was reported to be building an entry-level car based on the Model 3 but priced below it, ranging from 150,000 yuan (RM94,100) to 200,000 yuan (RM125,600). In terms of the broader new energy vehicle landscape in China, the Shanghai government has also been in talks with several companies for the sale of land for new energy vehicle production, according to a Reuters source.