From the Commissar of Production - Factory Evacuation

[Gris]

So ran the test.  With the KV factory out of production I was building an average of 23 per turn, by turn 22 I had 336 KVs.  On turn 23 my Vologda factory started up although it still had 15% damage, each turn the number of KVs built there increased by one; so with the two factories the production was:

Turn 23: 359 (23 built)
T24: 397 (38 built, Vologda now producing but at 15% damage)
T25: 436 (39)
T26: 476 (40)
T27: 517 (41)
T28: 559 (42)
T30: 601 (43, Vologda now fully repaired)

From T30 each turn produced 43 KVs, so it would seem that for each 3% of factory damage you lose the production of 1 KV.  This doesn't have anything to do with rail capacity at all, so RC only affects factory expansion chances, if you move a factory to a RC 1 then most likely your factory won't expand production as opposed to moved to Moscow with RC 30.

That was my understanding from the rule, that it only effected expansion directly. Indirectly over the long haul it gets you to the build limit quicker giving you more production, barring some other cap we don't know about. 

Interesting test. Right on.