Tesla’s factory in Shanghai had its best June ever, according to the China Passenger Car Association. In that month alone, it built 93,579 cars, marking a hefty 38 percent increase compared to June 2025. However, sales have been declining quarter on quarter in China for over a year now, particularly as buyers tire of the Model 3 sedan.

Almost 40 percent of the EVs that Tesla built in June were destined for export, with more than 50 percent going to Europe, Canada and other Asian markets. Low labour costs compared to Germany or the US are a big advantage here, as are cheaper components from local suppliers. Add some export-related tax rebates from the Chinese government, and it’s no wonder Tesla’s Shanghai plant is an extremely valuable asset.

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.

Tesla has also been working to reduce its dependency on China for cars it sells in the US, which remains the company's 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.