Tesla reportedly plans to cut production in Shanghai by 20% due to sluggish Chinese demand

Tesla Inc. plans to reduce production at its Shanghai factory, according to people familiar with the matter, in the latest sign request in China did not live up to expectations.

The production cuts will take effect as soon as this week, said the people, who requested anonymity because the information was not made public. They estimate the move could reduce output by around 20%.

The decision was made after car manufacturer assessing its short-term performance in the domestic market, one of the people said, adding that there is enough flexibility to increase output if demand increases.

A Tesla representative in China declined to comment.

The equipment marks the first time that Elon Musk’s electric vehicle pioneer has voluntarily reduced production at its Shanghai factory, with previous cuts due to the city’s two-month lockdown. . Closing order due to covid or supply chain growls. However, recently discount and additional incentives such as insurance subsidies, along with shorter delivery times, suggest that demand has not kept pace with supply after doubling the plant’s capacity to around 1 million vehicles per year.

Tesla’s China reduced delivery in October after hitting a record high in September.

Junheng Li, chief executive officer of equity research firm JL Warren Capital LLC, said in a November 22 report that the full production capacity at the Shanghai plant is about 85,000 vehicles per month. “Without a lot of promotions, new orders from the domestic market will probably normalize at 25,000 in December,” she said, adding that increased output cannot be achieved. exports are absorbed.

Tesla is facing increased competition from local car manufacturers As BYD Co. and Guangzhou Automobile Group, which is raising prices, in the world’s largest electric vehicle market. BYD posted record sales for the ninth consecutive month in November, with deliveries amounting to 230,000 units, including nearly 114,000 all-electric models.

Tesla’s reliability is also back in the spotlight after suffering two recalls in China in the past month, both the software was required to be repaired online and some vehicles had to be returned for maintenance. Recently fatal accident involvement in a Model Y that killed two people has once again sparked discussion about Tesla’s safety record.

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