According to a source with direct knowledge of the plan and a production note obtained by Reuters, Tesla has started manufacturing a variant of the Model Y in Shanghai that will be marketed in Canada this year. This marks the first time the company would export vehicles from China to North America.

The relocation would link North America, Tesla’s (TSLA.O) largest market, to the factory, which is the largest and most cost-effective in the world. The electric vehicle (EV) manufacturer’s Model Y is its most popular model worldwide.

Customers in Canada could order the updated Model Y between May and July, according to Tesla’s website.

The new Model Y and the more expensive long-range variant both qualify for incentives of C$5,000 on purchase or a four-year lease, according to an update to the Canadian government’s website on Friday.
The individual with knowledge of the development revealed that earlier this month, Tesla Shanghai started producing the Model Y model intended for Canada. According to the production document examined by Reuters, vehicles had been developed and tested with a goal of generating close to 9,000 units this quarter for export to North America.

A request for comment from Tesla was not immediately complied with.

The individual with knowledge of the development revealed that earlier this month, Tesla Shanghai started producing the Model Y model intended for Canada. According to the production document examined by Reuters, vehicles had been developed and tested with a goal of generating close to 9,000 units this quarter for export to North America.

A request for comment from Tesla was not immediately complied with.

In November, Reuters stated that Tesla had thought about exporting automobiles built in China to North America. Tesla CEO Elon Musk had simply stated “False” in a tweet following the publication of the Reuters report.

Tesla’s factory in Shanghai, according to Musk’s comments to analysts last week, has the “lowest cost structure” of all its facilities.

Under the EV incentive program of the Canadian Transport Agency, an SUV’s basic model must cost less than C$60,000 in order to be eligible for a subsidy of up to C$5,000. Then, higher-cost models with a price tag of up to C$70,000 are also eligible.

According to Transport Canada’s website, the arrival of the less expensive Model Y for Canada made it eligible for the incentive as of Friday, along with Tesla’s C$69,900 long-range Model Y.

The Model Y version made in Tesla’s Shanghai facility employs lithium-iron phosphate (LFP) batteries that are exported to Europe and other markets as well as sold in China.

Tesla has begun introducing the 4680 battery configuration, a more potent battery architecture, in its operations in Texas and California.

The new Model Y for Canada is also less expensive than the base U.S. model, coming in at $44,275 as opposed to the U.S. model’s current MSRP of $46,990.

Since the beginning of the year, Tesla has reduced the price of its Model Y versions three times in the United States as part of a volume-boosting discounting strategy that has hurt the company’s first-quarter profit margin and sparked a price war for EVs.

In terms of global sales, it sent over 271,000 Model Y and Model 3 sedans from its Shanghai manufacturing to Europe and other countries in 2017.

There are other Chinese EV manufacturers besides Tesla. Under its Dacia brand, Renault (RENA.PA) sells the Spring, an entry-level hatchback EV, in Europe. The iX3 is shipped from China to Southeast Asia and Europe by BMW (BMWG.DE).

China’s entire car exports increased by four times between 2020 and 2022 to reach two million vehicles, and if the pace from the first quarter is maintained, they will reach three million this year.