Tesla cuts EV production short in China as demand continues to fall

Tesla has reduced the production rates at the Gigafactory Shanghai, which is currently making cars for export markets as well. According to Bloomberg, the factory is now running on a five-day week schedule instead of its usual six-and-a-half-day schedule. Insiders point to a slowing demand for EVs aggravated by the growing competition from the local brands.

The giant industrial complex in Shanghai is making Model 3 sedans and Model Y SUVs for China and beyond. As of Q3 2023, the factory exceeded its annual production capacity target of 950,000 units. Earlier this March, a decision was made to introduce more days off to the schedule. Even so, the Gigafactory continues to run its car assembly lines in two-shift cycles, every shift lasting 11 hours 30 minutes.

Tesla warned the workers and some of the suppliers that the new schedule could remain active until the end of April. Early April is when China has the Qingming Festival, a traditional holiday dedicated to commemorating the dead, and the sales usually slow down for the duration of the holidays.

According to the CPCA (China Passenger Car Association), new car sales went up 17% in China in January–February 2024. EV and plug-in hybrid vehicle sales have gone up 37.5% over the same period. Tesla sales have dropped by 6% to 131,812 units. Even so, the company occupies a 53% share on the local market.

The Chinese branch of Tesla discounted both Model 3 trims on sale in China by nearly 6% in January. It also discounted two Model Y trims out of three by 3%. The company then wrapped up the New Year holiday season in February without any further discounts, while most of its local competitors including BYD, IM Motors, Li Auto, Neta, Nio, Polestar and XPeng continued slashing their prices throughout that month.

Sources are now reporting that Tesla actually wants to raise the prices of its EVs in China starting from April 1, 2024. For example, the Model Y may end up with a 5,000-Yuan ($700) premium. This remains to be confirmed, though.