Tesla plans to increase its production capacity for certain car parts at its Shanghai factory, according to a document seen by Reuters,

The company plans to add lines to make more battery packs, electric motors, and motor controllers, according to the document.

Tesla wants to almost double its annual building capacity for cooling pipes, a key part in a car's heat management system, to 260,000 sets a year from 150,000. It did not provide capacity details for other parts, according to Reuters.

The planned production line will not include battery cell manufacturing but will package out-sourced battery cells at the plant, the document said.

Tesla has previously said it wants to localize its entire supply chain in China by the end of this year.

The company is also building an additional stamping line to speed up car production in Shanghai, according to construction documents seen by Reuters.

The Shanghai factory is key to Tesla's growth strategy. There it aims to produce 150,000 Model 3 sedans and later hike output to 250,000 a year, including the Model Y, according to a government filing in 2018.

China's manufacturing will not only make Chinese-made models meet the price reduction window again, but also help Tesla reduce costs.

In the fourth quarter of 2019, Tesla's comprehensive gross profit margin was 18.8%, a decrease of 0.1% from the previous month; gross vehicle sales gross profit rate was 21.6%, a decrease of 0.2% from the previous month.

At the same time, the revenue cost of Tesla's auto sales business reached 4.815 billion US dollars, an increase of 19.95% month-on-month. After Model 3 is fully realized in China, raw material expenses can be saved by 10% -20%, manufacturing costs can be reduced by 50%, and labor costs can be reduced by 75%.

According to this calculation, the total production cost can be reduced by 20% -28%. This means that the gross profit margin of China-made Model 3 models will reach 35%.