Tesla Shuts Up Shop in Shanghai for Last Week of December

Elon Musk’s Tesla will suspend assembly for the Model Y at its Shanghai plant for the last week of December in a move that will cut planned production by a third.

Assembly will pause between December 25 and January 1, an internal memo said, despite production being kept open as normal the same time last year.

It has not been an established practice for the plant to shut down for a year-end holiday, the two people with knowledge of the subject matter said.

Tesla did not immediately respond to a request for comment.

20,000 Target

Tesla is targeting production of just over 20,000 Model Y vehicles for the last three weeks of December combined, including the week of suspended output, according to the memo.

By contrast, Tesla had kept the output of Model Y at a weekly rate of about 13,000 vehicles in November, equivalent to 39,000 over a three-week period, the people said.

It was not clear how and whether output of the Model 3 would be affected by the planned suspension of output of the Model Y in the last week of the month. The Model Y represents the largest share of production at the Shanghai plant.

Inventory Challenges

The company’s China operations have grappled with elevated inventory levels after the Shanghai plant completed an upgrade of manufacturing facilities in the summer.

Tesla added to its electric vehicle inventory in October at the fastest pace recorded for operations in Shanghai, brokerage data showed.

Since then, Tesla has been cutting prices and offering incentives to buyers in China. It posted record sales for November in China. On Wednesday, it offered a limited-time discount of 6,000 yuan ($860) to buyers in China on some models through to the end of 2022.

Tesla delivered 100,291 China-made EVs in November, the highest monthly sales since its Shanghai factory opened in late 2020, Xinhua reported on Monday, citing Tesla.

Weak Demand

While Beijing made significant relaxations to its zero-Covid policy this week, an auto industry body said on Thursday that demand was weakening faster than expected.

China’s passenger vehicle sales fell for the first time in six months in November. The auto industry group said it expects sales to stay flat next year in the world’s largest vehicle market – Tesla’s largest behind the United States.

The carmaker plans to start production of a revamped version of Model 3 in the third quarter of 2023 in Shanghai, as it aims to cut production costs and boost the appeal of the five-year-old electric sedan.

On a global basis, Tesla had planned to push production of the Model Y and Model 3 EVs sharply higher in the fourth quarter as newer factories in Austin, Texas and Berlin ramp production.