An overview of Tesla's Gigafactory in Shanghai Photo: VCG

China is becoming increasingly significant to US-based electric car producer Tesla, as it is starting to export made-in-China Model 3 vehicles to Europe amid fraying US-China relations.

The Made-in-China model 3 vehicles are ready to leave the port in Shanghai next Tuesday to be exported to Germany, France, Italy and other European countries, although CEO Elon Musk said the company did not plan to export when building its Gigafactory in Shanghai.

In the near future, Tesla hopes the Made-in-China vehicles can benefit global consumers not only through China manufacturing but China design, research and development, Song Gang, manufacturing and operations head of Tesla's Gigafactory in Shanghai said, according to media reports on Monday.

Auto analysts tied the reason for exports to robust capacity at the Shanghai factory, competitive costs of "Made-in-China" products, and the complete supply chain in the Chinese auto sector. 

"China boasts a complete supply chain in the auto sector, and that makes the country indispensable to Tesla," Feng Shiming, an independent car analyst, told the Global Times on Monday, adding that about 80 percent of the main parts in Made-in-China Tesla vehicles are sourced within the country. 

He described the Chinese auto market as a "circle" because the market is "self-sufficient compared with other markets, for instance, the demand-driven market of the US and the low-demand market of India."

In the first three quarters of 2020, amid the coronavirus pandemic, Tesla delivered about 318,000 vehicles across the globe. Feng told the Global Times that the Chinese market accounted for 27.3 percent, or about 86,800 vehicles, ranking second among all markets. 

Since the Shanghai factory should by now be able to produce 4,000 Model 3 cars per week, according to media reports, analysts said it is fine to shift inventory from China to other markets, as long as Tesla can satisfy demand from Chinese buyers. 

It is understandable for Tesla to export cars to Europe as the Gigafactory Berlin cannot produce cars at the moment, while capacity at Shanghai's Gigafactory is holding up well, said Wu Shuocheng, an independent car analyst.

"The quality of Made-in-China autos is not inferior to that from any mature auto market in the world," Wu noted. However, once the Berlin factory starts production, there will be no need to export vehicles from China to Europe, considering the shipment and tariff costs. 

Tesla is not alone. BMW and Polestar are making electric vehicles (EVs) in China and selling them to Europe.

The connection between Tesla and China has tightened. The company recently updated its Model 3 Standard Range Plus in China with lithium iron phosphate batteries, which are from Contemporary Amperex Technology, one of the world's largest suppliers of electric batteries. Its popularity among Chinese consumers is increasing day by day.