Tesla Slashes Model Y Production in China Amid Weakening Demand and Fierce Competition

Tesla has reduced the production of its popular Model Y electric vehicle by a significant percentage at its Shanghai facility since March, according to industrial data and reports from sources in the field.

This decision aims to tackle declining demand for Tesla’s older model in China, its second-largest market. A majority of cars manufactured in the Shanghai plant are sold in China, where intense pricing competition among electric vehicle manufacturers has emerged due to an economic slowdown.

Sources indicated that Tesla’s Shanghai plant, its largest global manufacturing hub, has planned to decrease Model Y production by at least 20% from March to June. The output data from the China Association of Automobile Manufacturers (CAAM) showed that in March and April, the number of Model Y units produced in China dropped by 17.7% and 33% respectively compared to the previous year.

Despite the total production of Model Y and Model 3 reaching 287,359 units in the first four months in China, a 5% decrease from the same period in 2023, Tesla’s Model 3 production saw a 10% increase according to CAAM figures.

Tesla refrained from commenting on these developments. The company omitted its 2030 target of delivering 20 million vehicles in its recent impact report, signaling a strategic shift towards robotaxis and away from electric vehicles. Tesla is focusing on leveraging artificial intelligence to drive new revenue growth.

In the same period, domestic manufacturer BYD led the segment in China with a 34.3% market share. Despite the decrease, it remained ahead of Tesla, which had sold 603,664 vehicles in China in 2023.

It remains uncertain whether these production cuts will extend to the second half of the year, encompass the Model 3, or be mirrored at Tesla’s U.S. and German facilities.