Tesla's plan to expand its Shanghai Gigafactory may have hit a speedbump, due to concerns over existing EV oversupply in the Chinese auto market.

According to Autonews, Tesla's plan to develop 172 acres of former farmland, some 3 km from its current Shanghai plant may face challenges since the National Development and Reform Commission (China's state planner), has recently been more cautious about approving new electric vehicle production plans.

Tesla had proposed expanding its Shanghai site to add 450,000 vehicles of annual capacity, over the approximately 1 million cars it currently makes. This is estimated to boost revenue to over USD 18 billion based on current retail prices.

Tesla's recent price cuts in China have not helped as well. Tesla announced further price cuts in January 2023 - the second time in 3 months - due to a drop in demand, which has started a price war with Chinese EV brands such as BYD and Nio.

But Tesla CEO Elon Musk has doubled down on price cuts, recently saying that higher volume and lower margins is a better strategy than making fewer cars at a higher profit.

Also read: As Tesla slashes prices in China, Chinese car makers seek refuge in Southeast Asia - to build new plants overseas

However, as battery and component costs drop, it's also plainly clear that Tesla needs more volume to maintain the cost advantage it has over other manufacturers; which has helped propel its export business into new markets like Canada and the ASEAN region.

Following Elon Musk's recent visit to China, reports emerged that talks about its Gigafactory expansion have been positive.

However, China's concerns about oversupply have slowed expansion plans, not just for Tesla but local EV companies BYD, Nio and newer players such as Xiaomi.

Also Read: BYD is China's best-selling domestic brand, over 1.8 million cars sold in 2022

According to the same report, Lucid, another growing EV carmaker from the US is also eager to enter China, but has been advised that chances are slim, for now at least.

With regards to its ASEAN expansion, Tesla is set to enter Malaysia officially and establish a head office, experience (showrooms) and service centres here, alongside setting up their fast-charging Supercharger network.

Also read: Tesla EVs are officially coming to Malaysia - Here's everything you need to know

The exact timeline has yet to be confirmed, but recent social media posts of long lines of Malaysian candidates lining up for an open interview with the company suggest that groundwork is already underway.