Tesla Inc. (NASDAQ:TSLA) has halted plans to expand its Gigafactory in Shanghai and make it a global export hub due to the strained U.S.-China relations, Reuters reported Monday, citing people familiar with the matter.
What Happened: Tesla now plans to limit the proportion of China's output in its global production as a 25% tariff on imported Chinese electric vehicles imposed by the former Trump administration remains in place, according to the report. The tariffs are in addition to existing levies.
In March, Tesla refrained from bidding on a plot of land across the road from its Shanghai plant as it no longer aimed to boost China production capacity significantly, as per Reuters. The land acquisition would have reportedly enabled the Palo Alto-based company to boost its production capacity by another 200,000 to 300,000 cars.
Why It Matters: Tesla currently manufactures the Model 3 sedan and the Model Y compact sport utility vehicle at the Shanghai factory, its first factory outside the U.S.
It was reported in March that the electric vehicle maker was preparing to expand its Gigafactory in China with a boost in production capacity for components such as powertrain and motors.
Of late, Tesla has been facing issues in China, its second-largest market. It was reported in March that China restricted access for Tesla vehicles to military and state-owned facilities on the grounds that cameras installed in the vehicles will collect sensitive information.
Tesla also suffered a backlash at the Shanghai Auto show last month, with protestors alleging their vehicles were plagued by malfunctioning brakes.
Price Action: Tesla shares closed 6.4% lower in Monday’s trading at $629.04.
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