Tesla Shanghai plant hits record June output but China sales slide

Tesla’s Shanghai factory produced 93,579 vehicles in June 2026, a 38% jump from a year earlier and a record for the month, but the plant is increasingly serving markets outside China. In the second quarter, exports edged out local deliveries for the first time: 128,394 cars were shipped to Europe, Canada and other Asian markets, compared with 126,157 sold domestically. Low labor costs, cheaper components from local suppliers and Chinese export tax rebates make the plant an extremely valuable asset, even as Tesla’s profit margins shrink. The Wall Street Journal reported in late July 2026 that some Tesla executives were tasked with separating the company’s Chinese and non-Chinese operations. Tesla denied the plan. The automaker has already pared its reliance on China for U.S. sales, its largest market. A U.S. ban on Chinese-linked connected-car software took effect for model-year 2027, and a hardware ban follows for model-year 2030. Tesla no longer imports Chinese-made cars to the U.S. and works with North American suppliers to avoid components of Chinese origin. Trade restrictions are not the primary driver, however. The real motive is Elon Musk’s desire to merge Tesla with SpaceX. The rocket company, which has begun using excess Cybertruck pickups in its operations, wants access to public investors. The S&P 500 index rejected a request by Musk, CEO of both companies, to bend its rules for SpaceX, which require four consecutive profitable quarters. Tesla joined the index at the end of 2020, so a merger would circum­vent those requirements. Both companies’ shares are down roughly 25% in 2026, though SpaceX’s measurement began only with its June initial public offering. A merger could be blocked by the U.S. government on national-security grounds because of SpaceX’s multibillion-dollar military contracts and Tesla’s Chinese operations. The logic is hard to follow if Tesla were just a carmaker. But Musk insists it is not.