US electric car maker Tesla Inc has halted plans to buy land to expand its Shanghai plant and make it a global export hub, people familiar with the matter said, due to uncertainty created by US-China tensions.
With 25% tariffs on imported Chinese electric vehicles imposed on top of existing levies under former President Donald Trump still in place, Tesla now intends to limit the proportion of China output in its global production, two of the four people said.
Tesla had earlier considered expanding exports of its China-made entry-level Model 3 to more markets, including the United States, sources told Reuters, a plan that had not previously been reported. Tesla currently ships China-made Model 3s to Europe, where it is building a factory in Germany.
Tesla’s Shanghai factory is designed to make up to 500,000 cars per year, and is currently producing Model 3 and Model Y vehicles at a rate of 450,000 units per year. In March, Tesla refrained from bidding on a plot of land across the road from the plant as it no longer aimed to boost China production capacity significantly, at least for now, three of the people said, declining to be named as the discussions were private.
In a statement to Reuters, Tesla said its Shanghai factory was “developing as planned”. The Shanghai city government, a key supporter in Tesla’s establishment of a wholly-owned factory in China – the first and only foreign passenger car plant not required to form a joint venture – did not respond to a request for comment.