American electric automaker Tesla has cut its electric vehicle production in China amid sluggish sales growth, Bloomberg reports, citing people familiar with the matter.
Tesla lowers Model Y/3 production in China
According to the report, Tesla recently instructed its Giga Shanghai employees to only work for five days instead of the usual 6 1/2 days a week.
By doing so, the Musk-led company can lower the production of electric vehicles in the Chinese facility, which includes the Model Y crossover and Model 3 sedan.
For context, Giga Shanghai’s production lines operate on two 11.5-hour shifts daily. It apparently remains unchanged.
However, the report sources said that Tesla has cut EV output at Giga Shanghai starting earlier this month without providing an exact schedule for the plant’s return to normal operation.
Tesla’s sales declined last year amid overall market growth
China’s overall passenger vehicle sales reportedly surged by 17% year-on-year in the January to February 2024 period. Likewise, new-energy vehicle (NEV) sales also increased 37.5% YoY.
In contrast, Tesla reported a notable 6% decline to 131,812 units in the same period, China’s Passenger Car Association (PCA) revealed. Of that total, only 53% went to the local market.
The drop in Tesla’s sales is indeed disappointing, given its series of price cuts in the Chinese market since the start of 2024.
In effect, Tesla’s stock declined as much as 3.9% ahead of the regular trading’s start on Friday.
Competition
Tesla’s dominant position is threatened not only by the Chinese NEV giant BYD but also by other companies with cheaper electric vehicle models.
In contrast, Tesla only sells two models in the Chinese EV market, the Model Y and 3. In 2023, the electric sedan received a minor upgrade, while the electric crossover had an even slighter update.
Apart from intensifying competition in the world’s largest auto market, waning global demand for electric vehicles also affects sales growth this year. Sales growth in China reportedly started to slow after the government withdrew nationwide subsidies at the end of 2022.
One of the sources also said that Giga Shanghai’s several production lines, including the battery workshops, will have longer suspensions. Therefore, Tesla warned staff and some suppliers to be ready for prolonged production limits through April 2024.
According to PCA, new-energy vehicle shipments to dealers will grow 25% to 11 units in 2024. However, it still indicates a downshift from 36% in 2023 and 96% in 2022.
