Tesla's (NASDAQ:TSLA) new factory in Shanghai, China has been a blockbuster success for the company. Going from breaking ground at the beginning of 2019 to vehicle production less than a year later, the new factory has already become a critical component to Tesla's growth story. In fact, the factory is now producing so many cars that it is beginning to export vehicles to Europe instead of just making vehicles for the local market.

Here's a closer look at the factory's production capacity -- and how it has become imperative to the automaker's continued growth.

Elon Musk at the groundbreaking event for Tesla's Gigafactory 3 in China

Elon Musk at the groundbreaking event for Tesla's Gigafactory 3 in China. Image source: Tesla.

Shipping 7,000 Model 3s from China to Europe

When Tesla first announced its factory in China, the company said the factory would be built to ship vehicles within the China market. This has been true up until now.

A Chinese news website called The Paper reported Monday morning that Tesla is shipping about 7,000 Model 3 vehicles from the Chinese factory to Europe this week, highlighting how important the factory has become to Tesla's continued growth.

Investors first learned of Tesla's plans to start shipping vehicles from its Shanghai factory to other markets in September, when Bloomberg reported that the factory may have the capacity to ship vehicles to other Asian countries and to Europe. 

Impressive production volumes

According to Tesla's third-quarter update, the Shanghai factory now has the installed production capacity to build 250,000 Model 3 units annually. This is up from a capacity of 200,000 in the prior quarter. 

Vehicle production at Tesla's factory in Fremont, California.

Tesla factory in California. Image source: The Motley Fool.

But Tesla's Shanghai factory may soon see another huge jump in vehicle production capacity, as the automaker is currently building out its Model Y production capacity at the factory.

During Tesla's third-quarter earnings call last week, management was unsurprisingly pleased with Tesla's progress in China.

"Then in terms of capacity build out, we're making progress on three major factories," said CEO Elon Musk in the company's third-quarter shareholder letter.

Musk continued:

We're continuing to expand Shanghai significantly, which is going incredibly well. The Tesla China team is just, I mean, incredibly good. ... It's like I'm always amazed by how much progress the Tesla China team makes. It's beyond all reasonable expectations.

Shanghai isn't the only place Tesla is making big progress on production capacity. During Q3, Tesla's annual production capacity at its factory in Fremont, California increased by 100,000 vehicles. Meanwhile, Tesla is also constructing Model Y production lines in Berlin and Texas. 

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