Tesla is also in the process of obtaining a key certification needed to sell China-made cars in the country.
Tesla says its China plant will be simplified and more cost-effective than its existing Model 3 line.
Tesla's request was denied because it was deemed “strategically important” to the “Made in China 2025” program.
Tesla expects capital expenditures of $2 billion to $2.5 billion this year.
Total Tesla production fell 10.92 percent to 77,100 vehicles from 86,555 vehicles in fourth quarter.
The Model Y is said to have the functionality of a sedan with the performance of a sports car.
Tesla said the current prices are valid until 18 March and hikes are limited to expensive variants.
Elon Musk has said Tesla aims to finish initial construction this summer and start production of the Model 3.
Tesla’s Shanghai factory plans to start making Model 3s at the end of this year.
The $35,000 version of Tesla’s cheapest model comes at a crucial time for the company.
Tesla’s pared-down version of its Model 3 sedan launched, the base model will have 220 miles of range
Tesla had $3.7 billion in cash and cash equivalents at the end of December.
The initial deliveries will go to customers who placed their orders before the end of 2018.
Musk said over half a million buyers had put down deposits on the new Tesla Model 3.
Tesla has sent two ships and at least one cargo plane with Model 3 vehicles to China.
Tesla also faces the unenviable choice of raising prices at the risk of losing customers.
Tesla has signed a preliminary agreement with China’s Tianjin Lishen to cut its reliance on Panasonic.
Tesla last week said it would cut thousands of jobs to rein in costs as it plans to increase production.
Tesla is cutting down on jobs by 7 percent, while its shares are now down by 4.1 percent.
The Chinese-made computer is among $16 billion in imports that were hit with 25 percent tariffs by USTR.