Tesla (TSLA) Halts Plans to Buy Land in Shanghai Amid Increased Tensions with China: Report

May 11, 2021 6:15 AM EDT

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Tesla (NASDAQ: TSLA) is suspending its plans to buy land next to its Shanghai plant amid renewed tensions between the United States and China, Reuters reports.

Two months ago, Tesla had a chance to bid for a piece of land across the road from its factory, but it declined to do so, according to sources cited by Reuters. Tesla decided for this course of action as it no longer plans to increase its China production, at least in the short-term.

Acquiring this land, with the size of 200-acres (80 hectares), would allow Tesla to raise its production capacity by another 200,000 to 300,000. Some industry experts think Tesla could use the land used as a car parking now to build EVs in the future.

The EV maker was looking to expand its Shanghai factory into a global export hub. The company also intended to ramp up exports of China-made Model 3 to other markets, including the United States. These units are already shipped to Europe, where Tesla is building a Gigafactory in Berlin.

Moreover, the company will place a limit on the China output in its global production. Elon Musk’s company faced strong criticism in China recently, concerning the quality of its cars. The company apologised and committed to “work with regulators for investigation."

However, the state media wasn’t buying this as they described Tesla’s statement as “insincere.”

"There have been consistent complaints on social media with Tesla in China regarding its quality and service issues, which seem to have been largely ignored by the local team until Tuesday," said Tu Le, analyst at research firm Sino Auto Insights.

"It's a delicate dance, though, since Tesla helps highlight the entire EV sector helping ALL companies grow their sales and raise their profiles," he adds.

TSLA stock is down 3.5% in pre-open Tuesday.

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