In comparison, Toyota Motor Corp. produced 1.6 million vehicles in China in 2021. General Motors produced 1.4 million with its major Chinese partner SAIC Motor Corp. Volkswagen plans to have capacity to make 1 million EVs in China by 2023.
The cost of the planned expansion and Tesla's timetable for completion were not immediately known.
Tesla started production at its Shanghai plant -- also known as the Gigafactory 3 -- less than a year after breaking ground. The plant makes the Tesla Model 3 sedan and the Model Y crossover.
Expansion plans for the existing plant aim to put Tesla on track to produce around 1 million vehicles this year, two sources familiar with the expansion plans told Reuters, though one said this also depended on the availability of parts.
Tesla has projected to take its weekly production to about 22,000 vehicles at the plant in the coming months, one of the sources said.
That production rate would amount to about 1.1 million vehicles over a year, more than double the plant's original projected capacity.
Reuters previously reported that Tesla could expand its capacity on the existing site.
The Shanghai city government did not immediately respond to a request for comment.
Shanghai has been a supporter of Tesla's establishment of a wholly-owned factory in China -- the first foreign auto plant not required to form a joint venture with a Chinese partner.
In a regulatory filing with Shanghai earlier this week, Tesla said it planned to expand parts production at its Shanghai factory, hiring additional workers and running its factory for longer in a day, to meet growing export demand.
Tesla sales have surged in China and its Shanghai factory has become a crucial export hub to markets such as Germany and Japan. Last year, Tesla's China-made cars accounted for around half of the 936,000 vehicles it delivered globally, based on Reuters calculations using China Passenger Car Association data.
Earlier this month, Tesla said its China revenue more than doubled in 2021 to $13.8 billion from the previous year. Elon Musk also said in October that Shanghai had surpassed its Fremont, Calif., factory -- the company's first plant -- in output.
Tesla has faced delays in opening a plant in Germany. Musk had originally aimed to open a Berlin plant in July last year. Approval for the plant has been complicated by a court case challenging a licence granted to its water supplier.