The European subsidies for the planned battery plant near Berlin were turned down because of delays.
The EU established a program to develop the battery industry on the continent and the electric car maker applied for the money.
According to official documents, the batteries cannot be made at another plant if the sites in receipt of the funds are the first ones to use the technology.
The opening of the plant, which will produce cars first before making batteries, has been delayed due to legal challenges. The company's valuation hit $1 trillion earlier this year and is likely to begin producing the same batteries elsewhere sooner.
The German government confirmed on Friday that the company was no longer seeking the subsidies.
The German economics ministry said that the state subsidies not used byTesla are now available for other projects.
Musk has called for German bureaucracy to be streamlined, after he voiced his frustration at the slow progress of the plant. The works council at the plant is due to be elected within days, which could give them power to delay or reject management decisions.
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Musk replied on Friday that he always believed that all subsidies should be eliminated, but that included the massive subsidies for oil and gas.
The government has supported other construction projects.
On Friday, a company filing in China revealed that the company plans to expand capacity at its Shanghai car plant, allowing it to increase staff numbers at the site by about a third and boosting production in the world's largest electric car market.
The maximum number of workers at the facility will be increased from 15,000 to 19,000, thanks to a Rmb1.2 billion spending spree by the US carmaker.
The plant in China will be able to produce more vehicles.
The site in China is able to make about 450,000 cars a year, which is close to the number of cars that the company sold last year.
The expansion comes after the company was forced to apologize to consumers in China after its response to complaints sparked protests and drew the ire of state media.
If Musk succeeds in his goal of 20 million vehicles a year by the end of the decade, he will make the company twice as large as Volkswagen and Toyota.
Despite global chip shortages, most of its rivals are curtailing production, but that hasn't stopped the company from making close to 1 million vehicles this year.
In its third-quarter results last month, the electric car maker said revenues rose 57 percent to $13.8 billion, while it posted a record quarterly profit of $1.6 billion.
Musk told investors last month that the site in China already produced more vehicles than the flagship facility in California.
The Model 3 and Model Y are made in China and sold in Europe.
Additional reporting by Wang Xueqiao.
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