Tesla has reportedly scaled back production of its flagship Model Y electric vehicle at its Shanghai manufacturing plant since March, directed towards mitigating slackening demand for the long-standing model in China, which represents its second-biggest market. Most cars manufactured at the Shanghai plant are sold within China, a market currently facing an aggressive pricing brawl between electric vehicle suppliers in the midst of an economic downturn.
Tesla's Shanghai factory, which is its largest production base globally, had plans to trim Model Y production by a minimum of 20% during the March to June timeframe, revealed an undisclosed source. The data provided by the China Association of Automobile Manufacturers (CAAM) substantiates this claim, reporting a drop of 17.7% and 33% in March and April respectively, compared to figures from the previous year.
Cumulatively, Tesla manufactured 287,359 units of Model Y and Model 3 combined in China within the first third of the year, a drop by 5% in comparison to the same duration in 2023. Interestingly, Model 3 production increased by 10% during this period, as per CAAM.
Tesla has remained silent on whether the production cut will continue into the latter half of the year or extend to Model 3. Equally uncertain is whether similar output adjustments would be implemented at its American and German production facilities. The company refrained from commenting on these developments.
Interestingly, in its latest impact report released last Thursday, Tesla omitted its initial aspiration of delivering 20 million vehicles annually by 2030. The shift indicates the company's strategic move towards the robotaxi industry as it seeks to leverage advancements in artificial intelligence for revenue growth.
Nevertheless, recent cutbacks on production and workforce, particularly in Tesla China's sales and charging service teams, have not derailed the company's ambition to sell between 600,000 and 700,000 vehicles in China in 2024. This forms part of its global objective of selling 2 million EVs, as per the initial target at the start of the year, a separate source revealed.
Amidst the challenges, Tesla implemented strategic actions like reducing Model Y prices in China to their lowest since its 2021 launch, coupled with offering zero-interest financial plans to Model 3 purchasers, to stimulate sales. Despite these efforts, Tesla's market share in China's combined clean electric and plug-in hybrid market fell to 6.8% in the first four months of this year, down from 7.8% throughout 2023.
In contrast, China's domestic automaker BYD primarily led the sector with a 34.3% market share throughout the first third of this year, a slight decline from the whole of 2023, which stood at 35%.