Tesla Inc (NASDAQ:TSLA) is scaling back plans to expand its plant in Shanghai due to trade tensions between the US and China, according to reports.
The Shanghai gigafactory is one of its main overseas plants, manufacturing Model 3 and Model Y models, but plans to buy land near to the existing site have been shelved, Reuters reported today.
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The carmaker was considering using an expanded plant to export cars to the US, said the report, but since 25% tariffs were imposed on products imported from China by President Trump, the electric vehicle group has had second thoughts.
China is a critical territory for both the carmaker's sales and production.
Demand there is booming. China accounted for US$3bn or 30% of revenue in the latest quarter with sales more than tripling over the comparable period in 2020.
According to Reuters, Tesla is also the only foreign carmaker in China not required to form a local joint venture when it set up there.
Currently the plant exports Model 3s to Europe.
The report said that Tesla never formally admitted an interest in acquiring the land plot but at half the size of its current plant, the site would have given the capacity to expand from 500,000 currently by another 200-300,000 cars a year.
In a statement, Tesla said that the Shanghai factory was developing as planned.