Key points:

  • Starting in March 2024, Model Y production at Tesla’s Shanghai plant has been reduced by 20%.
  • Tesla is shifting its focus from producing electric vehicles to developing robotaxis.
  • To stimulate demand in China, Tesla has lowered Model Y prices and offered a 0% interest rate financing scheme.

Since March 2024, Tesla has recorded a double-digit decline in production of its flagship Model Y electric car at its Shanghai plant. This was reported by a source familiar with the market situation, as well as data from industry analysts.

This measure is intended to offset the drop in demand for Model Y in China. Tesla’s second-largest market, China, has recently shown a cooling of interest in the model, which explains the need to adjust the company’s production plans.

Why is Tesla limiting production in China?

From March to June 2024, production of the Model Y electric car at Tesla’s Shanghai plant, the company’s largest production complex, was reduced by at least 20%.

Data from the China Association of Automobile Manufacturers (CAAM) confirms a decline in production volumes. There were 49,498 Model Y units produced in March 2024, down 17.7% from the same period in 2023. In April, the decline became even more significant: model production fell by 33%, to 36,610 units.

In the first four months of 2024, Tesla produced 287,359 Model Y and Model 3 vehicles in China. This is 5% less than in the same period last year. At the same time, Model 3 production increased by 10%.

It is not yet known whether Model Y production cuts will be extended into the second half of 2024. It also remains unclear whether it will affect the Model 3 and whether it will spread to Tesla factories in the US and Germany.

Tesla optimization

In a recent report, Tesla is revising its plans to produce 20 million vehicles by 2030. This is evidence that the company is shifting its focus from producing electric vehicles to developing robotaxis.

Tesla is betting on artificial intelligence as a key driver of future growth. Slowing electric vehicle production and recent layoffs in China don’t stop the company from still planning to sell 600,000 to 700,000 vehicles in the country in 2024.

Tesla’s global sales should reach 2 million electric vehicles in 2024.

To stimulate demand in China, the company in April slashed Model Y prices to their lowest level since the model went on sale in the country in 2021. Also, Model 3 buyers were offered a financing scheme with a zero interest rate.

However, Tesla’s market share in China’s electric and plug-in hybrid markets is falling. In the first four months of 2024, it fell from 7.8% to 6.8%. In 2023, 603,664 Tesla electric vehicles were sold in China.