Tesla Cuts Model Y Production in Shanghai

According to industry data and a source, Tesla (TSLA.O), opens new tab has dropped Model Y production at its Shanghai plant by a double-digit percentage since March

The action is taken in response to dwindling demand for the senior model of the U.S. automaker in China, its second-largest market where most vehicles manufactured at the Shanghai plant are sold, and electric vehicle manufacturers have engaged in fierce price competition due to the economic downturn.

The Shanghai plant, which serves as Tesla’s primary manufacturing facility worldwide, intended to reduce Model Y production by a minimum of 20% from March to June, according to a source who requested anonymity because the information is private. 

According to data from the China Association of Automobile Manufacturers (CAAM), Model Y production in China decreased by 17.7% and 33% year-over-year to 49,498 units in March and 36,610 units in April, respectively.

CAAM data revealed that Tesla manufactured 287,359 Model Y and Model 3 automobiles in China during the initial four months of 2023, which was 5% less than in 2023. Model 3 production increased by 10%. 

The extension of the output cut to Model 3 or into the second half of this year and the adoption of comparable output reductions by Tesla facilities in the United States and Germany remained uncertain at the time.

Tesla omits its objective and opens a new tab stating that it will produce 20 million vehicles annually by 2030 in its most recent impact report, released on Thursday. This indicates that the company is shifting its focus from electric cars to autonomous vehicles. The organization has been expediting its transition in anticipation of an advancement in artificial intelligence that will generate additional revenue. 

Despite the reductions in production and recent workforce reductions at Tesla’s China sales and charging service teams, the company maintains its initial targets of selling 600,000 to 700,000 electric vehicles (EVs) in China by 2024, out of a total of 2 million EVs it intends to sell worldwide. This information was obtained from an independent source. The source preferred anonymity due to their lack of official authorization to address the media.

To increase sales, Tesla reduced the price of the Model Y in China to its lowest level since the vehicle’s introduction to the country in April 2021. Additionally, the company provided Model 3 purchasers with a zero-interest financing option. 

The China Passenger Car Association reports that Tesla’s market share in China’s pure electric and plug-in hybrid sector has decreased from 7.8% in all of 2023, when the company sold 603,664 vehicles in the country, to 6.8% in the first four months of this year. 

China was led by domestic brand BYD, which held a 34.3% share for the initial four months of 2023, a decrease from its 35% share for the entire year of 2023.