Tesla significantly reduces Model Y production, possibly seeking a rapid transition

According to industry data and sources, Tesla has cut the production of its best-selling Model Y by double-digit percentages at its Shanghai factory since March.

This move aims to address the declining demand for its older models in China, which is Tesla's second-largest market. Most of the cars produced at Tesla's Shanghai factory are sold within China. The price war among electric vehicle manufacturers has been particularly fierce in the face of economic slowdown.

Due to confidentiality, an unnamed source stated that Tesla plans to reduce Model Y production at the Shanghai factory by at least 20% from March to June. The Shanghai factory is Tesla's largest manufacturing hub globally.

According to data from the China Association of Automobile Manufacturers, the production of Model Y in China was 49,498 units in March and 36,610 units in April, down 17.7% and 33% respectively year-on-year.

Data shows that in the first four months of this year, Tesla produced 287,359 units of Model Y and Model 3 in China, a decrease of 5% compared to the same period in 2023. Among them, the production of Model 3 increased by 10%.

It is not yet clear whether the production cut will continue into the second half of the year or impact the Model 3, and whether Tesla will take similar measures at its factories in the United States and Germany.

Tesla did not respond to a request for comment.

In its latest impact report released on Thursday, Tesla did not mention its goal of delivering 20 million cars annually by 2030, further indicating that the company is shifting from electric vehicles to autonomous taxis. Tesla has been accelerating its transformation, betting on breakthroughs in artificial intelligence to bring new revenue growth.

Another source said that although Tesla's China sales and charging service teams recently reduced production and laid off staff, the company still plans to sell 600,000 to 700,000 electric cars in China in 2024 with a global target of 2 million, consistent with the goal set at the beginning of the year. The source, who chose to remain anonymous, was not authorized to speak to the media.

In April, Tesla lowered the price of the Model Y in the Chinese market to the lowest level since its launch in China in 2021, while offering zero-interest financing for Model 3 buyers to boost sales.

According to data from the China Passenger Car Association, Tesla’s share of the overall pure electric and plug-in hybrid vehicle market in China has dropped from 7.8% for the whole of 2023 (when Tesla sold 603,664 cars in China) to 6.8% in the first four months of this year.

Local enterprise BYD led the market in the first four months with a 34.3% share, slightly down from 35% for the whole of 2023.