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Tesla\u2019s factory in Shanghai had its best June ever, according to the China Passenger \u2060Car Association. Tesla built 93,579 cars in China that month, a hefty 38 percent increase compared to June 2025, according to CPCA\u2019s data. But that production isn\u2019t translating into bumper sales to Chinese customers. Rather, sales have been down quarter on quarter in China for more than a year now, particularly as buyers tire of the Model 3 sedan.<\/p>\n
Almost 40 percent of the EVs that Tesla built in June were destined for export. And in Q2 in total, more than 50 percent\u2014just\u2014of the cars it built were for Europe, Canada, and other Asian markets: 128,394 versus the 126,157 Chinese-built Teslas that were sold to Chinese buyers. Low labor costs compared to Germany or the US are a big boon here, as are cheaper components from local suppliers. Throw in some export-related tax rebates from the Chinese government, and it\u2019s not hard to see how Tesla\u2019s Shanghai plant is an extremely valuable asset.<\/p>\n
Despite this seemingly critical importance to the automaker at a time when its profit margins are evaporating, Tesla may be contemplating a future without China. Last week, The Wall Street Journal reported that some Tesla executives have been tasked with separating Chinese and non-Chinese parts of the company, although Tesla denied such preparations were underway.<\/p>\n
But Tesla has been working to reduce its dependency on China for the cars it sells in the US, which remains the company\u2019s largest market. New US regulations banning Chinese-linked connected car software went into effect for model-year 2027, and a similar ban on Chinese-linked hardware comes into effect for model-year 2030, meaning cars that will be on US roads in two years. Tesla now no longer imports Chinese-made cars for sale in the US, and it has worked with its North American suppliers to make sure the components it buys don\u2019t have unwanted Chinese origins.<\/p>\n