In a Rare Move, Tesla Set to Downgrade Production in China Factory

Tesla is discussing to downgrade production at its Shanghai plant by 7% of capacity through the end of the year, despite a recent capacity boost. The move is considered rare for the world’s largest electric vehicle (EV) producer. Since Tesla opened the Shanghai plant in its second largest market in late 2019, it has been looking to run the facility at full capacity and recently upgraded the output by 30% to a maximum of 22,000 vehicles per week.

Although the decision for the downgrade has not been revealed yet, some say the figure was lower than they anticipated.

Tesla’s move comes amid increasing competition from domestic EV makers and a sharply shrinking economy, as consumption drops amid Beijing’s strict Covid-19 curbs.

The upgraded factory can produce 14,000 Model Ys and 8,000 Model 3s. Tesla has aimed to keep it running at full capacity, except during the upgrade and a city-wide COVID-19 lockdown for two months this year.

Tesla now plans to manufacture 20,500 units per week for the rest of the year, for a total of 13,000 Model Ys and 7,500 Model 3s.

Tesla’s China sales climbed nearly 60% in the first eight months of this year. However, that figure is much lower than the overall market for EVs over the same period, which saw the sales more than double.

Since last month, the company has cut delivery waiting times in China at least four times, to a minimum of a week now, besides offering a rebate of 8,000 yuan ($1,100) to buyers of Tesla insurance who take delivery between Sept. 16 and 30.

In the next few months, rising competition is expected to intensify a price war among EV makers.

Tesla sold 60% of its China-made cars in the domestic market during the first eight months, and exported the rest to overseas markets such as Australia, Europe, Japan and Singapore.

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