Exclusive: Tesla to run reduced output in Shanghai in January, plan shows

(Reuters) – Tesla (TSLA.O) plans to run a reduced production schedule at its Shanghai plant in January, extending the reduced output it began this month into next year, according to an internal schedule reviewed by Reuters.

Tesla will run production for 17 days in January between Jan. 3 to Jan. 19 and will stop electric vehicle output from Jan. 20 to Jan. 31 for an extended break for Chinese New Year, according to the plan seen by Reuters.

Tesla did not specify a reason for the production slowdown in its output plan. It was also not clear whether work would continue outside the assembly lines for the Model 3 and Model Y at the plant during the scheduled downtime. It has not been established practice for Tesla to shut down operations for an extended period for Chinese New Year.

Tesla did not immediately respond to a request for comment from Reuters.

Tesla shares were down 5.8% at $116 in premarket trading. The stock has dropped 56% since the start of October with investors citing concern about demand, including China, and the overhang of Chief Executive Elon Musk’s involvement in Twitter and his recent Tesla share sales.

Tesla suspended production at its Shanghai plant on Saturday, pulling forward an established plan to pause most work at the plant in the last week of December, Reuters has reported.

Tesla’s latest production cuts at Shanghai come amid a rising wave of infections after China stepped back from its zero-COVID policy earlier this month. That move has been welcomed by businesses although it has disrupted manufacturing operations outside Tesla.

Like other automakers, Tesla has also faced a downturn in demand in China, the world’s largest auto market. Earlier this month, Tesla offered an additional incentive for buyers taking possession of vehicles in December. The company has cut prices for Model 3 and Model Y cars by up to 9% in China, in addition to a subsidy for insurance costs.

Brokerage China Merchants Bank International (CMBI) said in a report issued on Tuesday that Tesla average daily retail sales in China from Dec. 1 through Dec. 25 were down 28% from a year earlier. It said Tesla recorded 36,533 retail sales in China from Dec. 1 through Dec. 25.

The brokerage, which tracks week-by-week retail auto sales data in China as a snapshot of demand, said industry-wide sales were up almost 15% by the same metric through Dec. 25. It said average daily sales for BYD (002594.SZ), Tesla’s larger electric vehicle rival in China, were up 93% in that period.

Tesla’s Shanghai factory, the most important manufacturing hub for Musk’s electric vehicle company, kept normal operations during the last week of December last year and took a three-day break for Chinese New Year.

The Jan. 21 to Jan. 27 period in 2023 is a public holiday in China for Chinese New Year.

Tesla’s Shanghai plant, a complex that employs some 20,000 workers. accounted for more than half of Tesla’s output in the first three quarters of 2022.

Tesla has set a target for growth of 50% in output and electric vehicle deliveries in 2022. Analysts expect output to fall short of that goal at closer to about 45%, based on forecasts for the soon-to-end fourth quarter.

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