Tesla Chops Output of Model Y Electric Vehicles in Shanghai

Tesla has reduced production of its best-selling Model Y electric car at its plant in Shanghai since March as demand weakens in China.

The move, revealed by industry data and confirmed by a source, stems from softer demand for the US automaker’s older model in China, its second largest market, where most of the cars produced at the Shanghai plant are sold.

The country has also seen a brutal price war among electric vehicle makers amid a significant economic slowdown.

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The Shanghai plant, Tesla’s biggest manufacturing hub globally, planned to cut Model Y output by at least 20% during the March to June period, according to the source, who declined to be named as the matter is private.

Data from the China Association of Automobile Manufacturers (CAAM) showed that output of Model Ys in China stood at 49,498 units in March and 36,610 in April, 17.7% and 33% lower, respectively, than a year ago.

In total, Tesla produced 287,359 units of Model Y and Model 3 cars in China in the first four months, 5% lower than the same period in 2023, with Model 3 output 10% higher, CAAM data showed.

It was not immediately clear if the output cut would be extended to the second half of this year or to Model 3 and if Tesla’s plants in the United States and Germany also have adopted similar output cuts.

Tesla did not respond to requests for comment.

Tesla has left out its goal of delivering 20 million vehicles a year by 2030 in its latest impact report published on Thursday, another sign the company was moving away from electric cars as it shifts focus to robotaxis.

The company has been accelerating its pivot to bet on a breakthrough in artificial intelligence to bring new revenue growth.

Sales targets unchanged

Despite the output cuts and recent layoffs at Tesla’s China sales and charging service teams, the company still aims to sell 600,000 to 700,000 cars in China in 2024 out of 2 million EVs it aims to sell globally, unchanged from the targets at the beginning of the year, a separate source said.

The source did not wish to be identified because of not being authorised to speak to the media.

Tesla in April cut Model Y prices in China to their lowest levels since the model was first launched in the country in 2021, while offering a zero-interest financing scheme for Model 3 buyers to boost sales.

Tesla’s share in China’s overall pure electric and plug-in hybrid market has slid to 6.8% in the first four months of this year from 7.8% in all of 2023, when it sold 603,664 cars in the country, according to the China Passenger Car Association.

Homegrown BYD led the segment in China with a 34.3% share for the first four months, which was down from 35% for the whole of 2023.

Work begins on battery factory

Meanwhile, in related news, Tesla has broken ground on a new manufacturing factory in Shanghai, where it plans to make thousands of Megapacks every year, according to CNN, which cited a statement by Lingang Group, the state-owned developer of the area housing the plant.

Megapacks are large batteries used to store significant amounts of electricity.

The battery factory, announced last year, will be close to Tesla’s Gigafactory, which is the company’s largest plant outside the US and produces almost a million cars a year.