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May 11, 2021updated 12 May 2021 5:01pm

Tesla halts Shanghai expansion plans

Tesla has halted plans to buy land to expand its Shanghai plant and make it a global export hub, Reuters sources have 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 US president Donald Trump still in place, Tesla now intends to limit the proportion of China output in its global production, two of the four sources told the news agency.

Tesla had earlier considered expanding exports of its Chinese made entry level Model 3 to more markets, including the US, 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 sold 25,845 China-made vehicles in China and overseas in April, down from 35,478 in March, according to data from China Passenger Car Association cited by Reuters.

Its Shanghai factory is designed to make up to 500,000 cars per year, and has the capacity to produce 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 Reuters sources said.

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 Reuters request for comment.

Tesla had never declared an intention to acquire the land, which is about half the size of the 200-acre (80 hectare) plot housing Tesla’s current facility and would enable the company to lift capacity by another 200,000 to 300,000 cars, said two of the news agency’s sources.

The report said Tesla still has land, designed for production but now used for parking, at its Shanghai site. One of the Reuters sources said Tesla could expand its capacity beyond 500,000 on its existing site. Another said Tesla may acquire more land for more car production lines in the future.

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