Tesla Inc. TSLA has reportedly significantly reduced the production of its Model Y SUV at its Shanghai gigafactory since March.
What Happened: The electric car manufacturer has cut the output of its Model Y by a double-digit percentage at its Shanghai plant, Reuters reported on Friday, citing industry data and a source.
The decision is reportedly a response to the waning demand for Tesla’s older model in China, which is the company’s second-largest market. The majority of the vehicles produced at the Shanghai plant are sold in China, where a fierce price war has erupted among electric vehicle manufacturers amid an economic slowdown.
The Shanghai plant is planning to reduce Model Y output by at least 20% from March to June, Reuters reported. The China Association of Automobile Manufacturers (CAAM) data revealed that the Model Y output in China was 17.7% and 33% lower in March and April, respectively, compared to a year ago.
The report added that it is not immediately clear if the production slash applies to the second half of the year or to the Model 3 which is also produced at the factory.
Why It Matters: The company still aims to sell 600,000 to 700,000 cars in the country in 2024, out of the 2 million EVs it aims to sell globally, a separate source told the news agency.
The production cuts come amid a challenging time for Tesla in China. The company’s share in China’s overall pure electric and plug-in hybrid market has dropped to 6.8% in the first four months of this year from 7.8% in all of 2023, according to the China Passenger Car Association (CPCA).
Data released by the CPCA earlier this month showed that the company sold 62,617 made-in-China EVs in April, down 18% year-over-year, including the 30,746 units exported.
Last month, Tesla cut prices on Model 3 and Y in China by as much as 6%. While the Model 3 rear-wheel drive now starts at 231,900 yuan in the country, the Model Y starts at 249,900 yuan.
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Photo courtesy of Tesla.
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