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SHANGHAI – U.S. electric car maker Tesla Inc has suspended land purchase plans to expand its Shanghai plant and turn it into a global export hub, people familiar with the matter have said amid the uncertainty created by the American-Chinese tensions.

With 25% tariffs on imported Chinese electric vehicles imposed on top of existing taxes under former President Donald Trump still in place, Tesla now intends to limit Chinese production’s share in its global production, two of the four people said.

Tesla had previously considered expanding exports of its entry-level China-made Model 3 to more markets, including the United States, sources told Reuters, a plan that had not previously been reported. .

Tesla currently ships Model 3s made in China to Europe, where it is building a plant in Germany.

The Tesla plant in Shanghai is designed to manufacture up to 500,000 cars per year and currently produces Model 3 and Model Y vehicles at a rate of 450,000 units per year.

In March, Tesla refrained from bidding on a lot in front of the factory because it was no longer aimed at significantly increasing China’s production capacity, at least for now, three people said, declining to be named because the discussions were private. .

In a statement to Reuters, Tesla said its Shanghai plant “is developing as expected.”

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The Shanghai city government, a key supporter of Tesla’s creation of a wholly-owned factory in China – the first and only foreign passenger car factory not required to form a joint venture – did not respond to a request for comment.

Tesla had never declared its intention to acquire the land, which is about half the size of the 200-acre (80-hectare) parcel housing Tesla’s current facility and would allow the company to increase capacity. an additional 200,000 to 300,000 cars, two of the people said.

Tesla’s sales in China are on the rise despite growing regulatory pressure in the country after consumer disputes over product safety and the scrutiny of how it handles data.

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

LAND PLANS

Led by Mercurial CEO Elon Musk, Tesla is known to change strategy, including in China.

Construction documents posted on a government website in March show Tesla is revamping its Shanghai plant to increase capacity.

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

Additionally, Tesla is building facilities to repair and replicate key components such as electric motors and battery cells and build EV chargers at its Shanghai plant.

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The Shanghai government has spoken to several companies to sell the land for the production of new energy utility vehicles, said a person with direct knowledge of the matter.

Tesla faces increased competition in China with domestic players such as Nio Inc, which plans to manufacture mass products under a different brand.

Even before the trade war tariffs, relatively few cars made in China were shipped to the United States.

General Motors Co sells its China-made Buick Envision to the United States, paying the additional 25% tariff, although the SUV is not a high-volume model. ($ 1 = 6.4310 yuan Chinese renminbi) (Reporting by Zhang Yan in Shanghai and Yilei Sun and Tony Munroe in Beijing; additional reporting by Hyunjoo Jin in San Francisco; Editing by Lincoln Feast.)

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An in-depth report on The Logic’s innovation economy, presented in partnership with the Financial Post.

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