Tesla Gigafactory in Shanghai, China

The Shanghai plant, which was completed in record time as it sped through approvals and construction, represents a cornerstone of Musk’s plans to make Tesla a truly global carmaker. The Chinese facility has already delivered the Tesla Model 3 and Tesla Model Y, with Model Y since January 2021.

Tesla’s 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 total units per year. Tesla still has land, designed for production but now used for parking, at its Shanghai site and with the extra space Tesla could have made an extra 200,000 vehicles, the sources said.

It has generated $3 billion in revenue in China in the first three months of this year, more than tripling year-earlier sales and accounting for 30% of total revenue.

However, Tesla has said to stopped a planned expansion of its Shanghai plant and will slow production in China because of tension between the China and US.

With 25% tariffs on imported Chinese electric vehicles imposed on top of existing levies under former U.S. 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 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.

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.