Tesla Plans For A Second Plant In Shanghai To Increase China Production Capacity to 2M Cars: Report

Electric vehicle leader Tesla Inc TSLA has ambitious plans for China, a country considered to be a vital part of the company's growth story.

What Happened: Tesla is starting to organize a second plant in Shanghai as early as next month, Reuters reported, citing people familiar with the matter. The rumored plant along with the expanded capacity of the original Giga Shanghai will take the U.S. EV maker's China production capacity to an annual rate of up to two million units, the report said.

A capacity of this magnitude puts Tesla's production on par with major automakers operating in the country, the Reuters report said.

Japanese auto giant Toyota Motor Corp. TM produced 1.6 million vehicles in China in 2021 and General Motor Company GM along with its Chinese partner SAIC Motors had a tally of 1.4 million units for the same period.

The new plant reportedly will be located in the vicinity of the company's existing production base in Lingang, Pudong New Area.

Related Link: Why This Analyst Thinks Tesla Is a $2,500 Stock And When It May Reach That Price Target

Why It's Important: Tesla is doubling down on its investment in China. A recent filing with the local Shanghai government revealed the company is proposing to expand part manufacturing capacity at its Giga Shanghai to meet export demand.

The Giga Shanghai serves as Tesla's export base. The company ships vehicles out of the plant to Europe, as the reopening of the Giga Berlin plant has been pushed back due to environmental concerns. The company currently manufactures its Model 3 sedans and Model Y SUVs in its Chinese plant.

Tesla delivered 484,130 units of Giga Shanghai-made cars in 2021, which includes both domestic sales exports. Production capacity during the year was at 450,000 units.

TSLA Price Action: Tesla shares were down 0.14% at $760.79 Thursday morning at publication.

Related Link: After Strong Q4 Deliveries, Does Tesla's Growth Hinge On These 2 Factors?

Photo: Model 3 courtesy of Tesla Inc.