Lending Association

Tesla reduces its Chinese EV production citing weaker sales and rising competition

Tesla has reportedly reduced production of electric vehicles (EVs) at its huge Shanghai factory in China because of intense competition and weak sales.

Bloomberg reported late last week that the EV maker had told employees at its Shanghai plant a couple of weeks ago to cut production of the Model Y and Model 3 by working five days a week instead of the usual 6.5 days.

But the two daily 11.5 hour production shifts reportedly remain unchanged.

The news emerged a day after Tesla lifted the prices of cars by 1%.

The Shanghai factory produces more than 950,000 vehicles a year, its largest in the world for both the Chinese domestic markets and exports into Asia and Australia.

Industry figures show the company lifted sales inside China in the first two months of the year but exports were down sharply.

Tesla shares fell by just over 1% on Friday on Wall Street but still ended the week up half a per cent – well shy of the 1.5% to 2% plus jump by the wider market.

Bloomberg also reported that some production areas at Tesla’s factory, including the battery lines, are no longer subject to the suspensions.

The report claimed that Tesla has told employees and some suppliers to prepare for the extension of production restrictions through April, adding that early April will see the Tomb Sweeping Day in China, a holiday that is also usually a slow season for consumption.

This year’s Tomb Sweeping Day holiday will be April 4-6, and April 7 will be a working day, albeit a Sunday.

Tesla saw its sales in February slow to 30,141, down 11.1%year-on-year (because of the Lunar New Year break) and down 24.4% from January. The latter was probably due to the way the company splits production each month between domestic sales and exports.

In fact while Tesla exported 30,224 vehicles from China in February, that was down 25.3% year-on-year but only down 4.25% from January (which was also due to the holiday break).

In January-February, Tesla sold 70,022 vehicles in China, up 15.23% year-on-year, according to Chinese industry data.

Its Shanghai factory exported 61,790 vehicles in the first two months, down 22.46% from a year earlier which probably tells us why there’s now reports of a production slowdown.