How Do You Say "Demand Hell" In Mandarin: Tesla's China Model 3 Sales Collapse 64%

If you spent the weekend trying to figure out why Elon Musk is in the midst of a nervous breakdown that has him doing battle with the entire state of California and many Democrats, we might have an answer.

In addition to the continued production shut down at the company's Fremont factory - which is expected to cost Tesla billions in cash burn according to TSLA cheerleader Adam Jonas, with re-opening becoming a hotly contested issue that is now being litigated by Musk as he antagonizes California's liberals by threatening to pull out of the state - Tesla's Shanghai factory posted disastrous numbers for April, despite China's ongoing re-opening.

Tesla sold just 3,635 Model 3 vehicles in China in April, down 64% from March, according to the China Passenger Car Association and CNA. The CPCA said in a briefing that Tesla had produced more than 10,000 units in March. The April dropoff comes despite a recovery in the overall EV market: sales were up 9.8% month-to-month for EVs. 

So why the drop off?

Recall, we reported on May 7 that the company had shut down its Shanghai factory and told workers to extend their ongoing Labor Day break for a couple of days. But the holidays only started on May 1. One Chinese technology news site speculated that component shortages could be the reason for the shut down. In addition to having trouble sourcing some parts, there was also talk about a piece of manufacturing equipment being fixed.

Some employees remained on site for equipment inspection, maintenance and repair, according to Bloomberg. Tesla said it was conducting "normal maintenance work" and that the company was taking advantage of the holiday schedule to make adjustments. Is it possible that equipment had failed earlier than May 1 or that the company had shut down prior to disclosing it? Doesn't seem possible, as Tesla is said to have produced over 12,000 cars during the period. 

Or, a more likely scenario, has demand in China simply waned that much from March? Recall, Musk also said in late April that Tesla was going to be lowering the price of its Model 3 in China to qualify for a subsidy:

"We are making rapid progress on lowering the production cost in China, and we’re actually excited to announce on this call that we will be reducing the price of the Standard Range Model 3 basically tomorrow China time," Musk said on April 29.

"And that will be a price below the subsidy limit, and we feel confident that that will still be a vehicle that delivers good gross margin."

Is it possible that the true reason for lowering Model 3 pricing is that people in China just don't want any? As we're already halfway through the quarter, it won't be long before we know the true story - or at least Tesla's version of it.