Tesla has suspended its plan to expand Giga Shanghai. It failed to get approval from the Chinese authorities, as reported by SCMP.
The world biggest EV maker wanted to double the factory’s annual capacity to 2 million units. However, approval to go ahead with construction has not arrived yet. There has been no official reason for the delay in permission.
According to Reuters, there have been concerns about data security. These are linked to the connection between Tesla and CEO Elon Musk’s other company, SpaceX, which runs a satellite internet business. Reuters claims the reluctance to approve is tied to this.
Musk had earlier said the Chinese government had asked him not to roll out Starlink in China.
However, other industry experts have pointed to the slowdown in demand for premium EVs.
“Weak demand [for their cars] could be another key reason for the delay [of the expansion],” said Chen Jinzhu, CEO of Shanghai Mingliang Auto Service, a consultancy. “It does not make sense if a carmaker expands production but the vehicles cannot be sold.”
Even Tesla has introduced price cuts to make its cars more attractive after a steep decline in monthly sales in December.
Despite the weakening demand, Tesla ruled the premium SUV category with the Model Y throughout 2022.