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Tesla To Suspend Shanghai Factory Output Later This Month, Reports Say

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by Tyler Durden
Friday, Dec 09, 2022 - 12:45 PM

Numerous reports surfaced Friday morning of Tesla "suspending" Model Y and Model 3 production at its massive Shanghai factory later this month due to upgrades at the plant and waning consumer demand. 

Model Y and Model 3 production lines are expected to be suspended in the last week of December, according to Bloomberg, citing people familiar with the matter. They said Model 3 production could resume in early January, though Model Y output disruptions could be prolonged. Another person said Model 3 production could be suspended again later in the month for the Chinese New Year. They added that this would allow for more upgrades and equipment maintenance to produce an enhanced version of the model. 

In a separate report, Reuters cited two people with direct knowledge and an internal memo about the automaker's plan to suspend Model Y production at the plant between Dec. 25 and Jan. 1. 

The two people said the suspension of the assembly line would result in a 30% reduction in Model Y production for the month. They added this type of production halt isn't a common practice for the plant. 

"The Shanghai factory, the most important manufacturing hub for Elon Musk's electric vehicle company, kept normal operations during the last week of December last year," Reuters said. 

Earlier this week, Bloomberg said that slumping Chinese demand would result in the factory reducing production by 20% from full capacity. And almost immediately, a report from Shanghai Securities Journal called it "false information." 

In November, Tesla delivered 100,291 Chinese-made vehicles, the highest monthly production since the factory opened in late 2020. 

Beijing relaxed zero Covid policies this week and quietly launched quantitative easing to prop up its faltering economy. China's passenger vehicle sales dropped in the six months ending in November. The country's auto industry group expects sales to remain flat next year. 

Reuters reported last month that Tesla plans a revamped version of Model 3 to cut production costs and boost the style of the five-year-old electric sedan. Tesla has also cut prices in the second-largest economy in the world to stay competitive with domestic bands. 

Tesla shares year-to-date have been more than halved. 

"Now, however, lead times are shortening drastically, suggesting the company still has inventory on hand. Any Model 3 or Model Y ordered in China today should be delivered within the month, Tesla's website shows. That lead time is down from as long as four weeks in October and up to 22 weeks earlier this year," Bloomberg concluded. 

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