Tesla Cuts China Plant Output Amid EV Market Challenges

Tesla Inc. has reduced electric car production at its Chinese facility owing to slow new-energy vehicle sales and increased competition in the world's biggest auto market. This month, the company instructed Shanghai workers to produce the Model Y SUV and Model 3 sedan five days a week instead of six and a half.

Despite a 17% increase in passenger car sales in China in the first two months of 2024 and a 37.5% increase in new-energy vehicle sales, Tesla saw shipments drop year-over-year, according to Bloomberg. The firm confronts increased competition in China from BYD Co. and other cheaper electric car producers face increased competition in China.

Production Lines Halted Until April

Tesla competes in China with two pre-2020 vehicles and a small Model 3 sedan improvement from last year. Electric vehicle sales are falling in China, the US, and Europe. Tesla's Shanghai facility has paused several production lines, including battery workshops, and informed personnel and suppliers of prolonged output constraints until April, China's Tomb Sweeping Day.

According to China's Passenger Car Association, Tesla delivered 131,812 cars in the first two months of 2024, down 6% from last year. Despite discounts and incentives, just 53% of shipments went local. Chinese electric vehicle sales fell when the government ended incentives in 2022. The group projected a 25% increase in new-energy vehicle shipments to 11 million units this year, a decrease from 36% in 2023 and 96% in 2022.

(Photo : Xiaolu Chu/Getty Images)

An aerial view of Tesla Shanghai Gigafactory on March 29, 2021 in Shanghai, China. Tesla Shanghai Gigafactory is reportedly producing vehicles at a rate of about 450,000 cars per year.

This development follows Tesla's announcement of increasing Model Y prices in some European countries by 2,000 euros ($2,177) on March 22. This follows the company's April 1 $1,000 price increase for all Model Y automobiles in the US. TechTimes reported that Tesla increased the prices of its Model Y rear-wheel drive and long-range models by $1,000 in Europe on March 1.

Cybertruck Resale Market Loses Steam

Meanwhile, thre resale value of Tesla Cybertruck has plummeted after the EV sold for double their initial price a few weeks ago. Accoridng to Electrek, the EV manufacturer has put policies in place to limit the Cybertruck resale market. Tesla has imposed a "no resell" provision on early VIN Cybertrucks, fearing $50,000 in lawsuits. Tesla also cautions that violators might face future car sales denials.

Tesla has imposed restrictions on early Cybertruck buyers which likely to limit Cybertruck resale availability and raise prices. Although there were no reports about Tesla suing anybody, the publication discovered that several early Cybertruck sellers were blacklisted.

Last month, an early Cybertruck sold for $244,000, showing considerable interest. However, prices have dropped, and resellers are struggling to profit from these vehicles.

Recently, the EV maker has confirmed its capacity to produce 1,000 Tesla Cybertrucks per week at Gigafactory Texas.