Tesla cuts production by 20% at its Shanghai plant, an indication of slowing demand

Tesla plans to cut production at its Shanghai plant, according to people familiar with the matter, in the latest sign that demand in China is not meeting expectations.
The people, who asked not to be identified because the information is not public, said the production cuts would take effect as early as this week. They estimate that this move could reduce production by about 20%.
The decision was made after the automaker assessed its near-term performance in the domestic market, one of the people said, adding that there was enough flexibility to ramp up production if demand increased.
This is the first time EV pioneer Elon Musk has voluntarily cut production at his Shanghai plant, on top of previous cuts stemming from the city’s two-month lockdowns due to COVID-19 and supply chain crises. However, recent price cuts and further incentives such as insurance subsidies, coupled with shorter lead times, mean demand has failed to keep pace with supply after an upgrade doubled the plant’s capacity to around 1 million cars a year.
Tesla’s shipments to China fell in October after hitting a record high in September.
The full production capacity of the Shanghai plant is about 85,000 vehicles a month, Junheng Lee, CEO of equity research firm JL Warren Capital, said in a Nov. 22 statement. “Without further promotion, new orders from the domestic market are likely to normalize to 25,000 in December,” he said, adding that the increase in production could not be fully absorbed by exports.
Tesla faces intense competition from local automakers like BYD and Guangzhou Auto Group, which are driving up prices in the world’s largest electric car market. BYD recorded its ninth consecutive month of record sales in November, with deliveries exceeding 230,000, including nearly 114,000 pure electric models.
Tesla’s reliability has also returned to the spotlight after having two recalls in China last month, for software repairs and some vehicles for maintenance. A recent fatal Model Y crash that killed two people has sparked a new debate about Tesla’s safety record.
(flowering)