Tesla's Shanghai factory is currently producing vehicles at a rate of 450,000 units per year.
But the U.S. electric car maker has reportedly halted plans to buy land to expand the plant to make it a global export hub.
People familiar with the matter say it's due to uncertainty created by U.S.-China tensions.
25% tariffs on imported Chinese electric vehicles imposed on top of existing levies introduced under former President Trump are still in place.
And sources have told Reuters that Tesla now intends to limit the proportion of China output in its global production.
Tesla currently ships China-made Model 3s to Europe, where it is building a factory in Germany.
The sources added that in March, Tesla refrained from bidding on a plot of land across the road from the plant as it no longer aimed to boost production capacity significantly, at least for now.
In a statement to Reuters, Tesla said its Shanghai factory was "developing as planned."
The Shanghai city government did not respond to a request for comment.
It's been a key supporter in Tesla's establishment of a wholly-owned factory in China - the first and only foreign passenger car plant not required to form a joint venture.
Tesla's China sales are surging despite mounting pressure in the country over how it handles data.
It generated $3 billion in revenue in China in the first three months of this year, more than tripling year-earlier sales and accounting for 30% of total revenue.
One of the sources said Tesla could expand its capacity beyond 500,000 on its existing site.
Another said it might acquire more land for more car production lines in the future.