Tesla cuts Model Y production in Shanghai as demand weakens

Tesla has cut output of its best-selling Model Y electric car by a double-digit percentage number at its Shanghai plant since March, according to industry data and a source.

The move is aimed at addressing weakening demand for the U.S. automaker’s aged model in China, its second largest market into which a majority of the cars produced at the Shanghai plant are sold and where a brutal price war has erupted among electric vehicle makers amid an economic slowdown.

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, said the person, who declined to be named as the matter is private.

Data from the China Association of Automobile Manufacturers (CAAM) showed the output of Model Y in China stood at 49,498 units in March and 36,610 in April, 17.7% and 33% lower, respectively, compared to 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 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.

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.

—Zhang Yan and Casey Hall, Reuters

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