Tesla's Shanghai Plant Expansion Is in Jeopardy Due to Starlink Data Concerns

Tesla's plans to expand its Shanghai facility have reportedly been delayed due to Starlink data concerns that may pose a problem for the automaker to grow further in China.

Data Concerns

According to insiders that Bloomberg has talked to, the plant's capacity was supposed to increase to about 2 million vehicles a year as a result of the so-called phase-three expansion. It was expected to begin in the middle of the year.

One of the persons familiar with the matter claimed that certain central government officials had raised concern about the company's extensive presence in Asia's largest economy because of its ties to Elon Musk's satellite network Starlink.

Beijing has become more worried about data security and social stability. Apparently, Tesla vehicles' Starlink system would enable customers to avoid China's Great Firewall.

Both Tesla and Space Exploration Technologies Corp. are led by Musk, who in 2019 began launching Starlink satellites.

Before the opening of regular trading in New York at 5:13 AM, Tesla shares had already given up as much as 2% of their previous gains.

At a time when tensions are high between the US and China, the public's displeasure with the US electric vehicle (EV) manufacturer is increasing in tandem with the delay.

About the weekend, Tesla owners in China flocked to dealerships to vent their frustration over being left out of the latest round of price decreases. In 2021, Tesla automobiles were barred from Chinese military and residential facilities citing privacy concerns related to the vehicles' in-built cameras.

Strategic Expansion

Tesla's development and expansion of its Shanghai factory, stages one and two, are complete.

After 2022's renovations, the facility that began construction in 2019 can crank out 1 million Model 3 cars and Model Y SUVs each year. Expansion into a third phase would have required a lot more building space and land.

One of the persons indicated that unless they get further information from high-ranking central government officials, the third phase's future is uncertain.

According to the sources, Tesla has the backing of Shanghai's municipal government.

The Shanghai Tesla plant is expected to produce over 710,000 vehicles in 2022, accounting for around 52% of the company's global production.

On the other hand, Tesla has opened shops in Thailand as part of its ongoing Asian expansion as sales slow in China.

Also, the carmaker is allegedly close to a preliminary arrangement to build up a facility in Indonesia that could build as many as 1 million vehicles annually.

Hurdles and Competition

The slowing economic development and adherence until recently to Covid Zero have affected consumer demand in China, the world's largest automotive and EV industry.

Tesla has responded to months-long lockdowns and supply shortages by lowering pricing and maintaining incentives.

These moves are crucial, considering that the December 2022 deliveries were down to roughly 56,000 units as plant improvements and weak customer demand caused manufacturing to be briefly halted. During the same time, BYD, a local competitor, delivered 111,939 EVs.