The factory makes the electric Model 3 sedans and Model Y crossovers for domestic and international markets, including Germany and Japan.

The letter, dated May 1 and addressed to local authorities in Shanghai's Lingang Special Area, outlined the lengths to which the city went to help Tesla, indicating the U.S. automaker's importance to Shanghai.

The expansion, if it goes ahead, would give Tesla EV-dedicated production capacity in the world's largest auto market on a par with more established brands in China.