Shulou(Shulou.com)11/24 Report--

On December 5, Reuters quoted people familiar with the matter as saying that Tesla plans to reduce the capacity of its Shanghai plant because domestic demand for electric vehicles has not met Tesla's expectations.

People familiar with the matter said the cuts would take effect as soon as this week. They estimate the move could reduce capacity at the Shanghai plant by about 20 per cent.

One of the people familiar with the matter said the decision was made after Tesla evaluated its recent performance in the Chinese market. Tesla has the ability to ramp up capacity quickly if demand increases, he added. Tesla China declined to comment.

The production cut marks Tesla's first voluntary reduction in capacity at its Shanghai plant. However, recent increases in incentives such as price cuts and insurance subsidies, as well as shorter lead times, suggest that demand has outpaced supply following factory upgrades. Tesla's Shanghai plant doubled capacity to about 1 million vehicles per year.

Tesla China's deliveries declined in October after hitting a record high in September.

Li Junheng, CEO of equity research firm JL Warren Capital, said in a Nov. 22 research report that Tesla's Shanghai plant has a full capacity of about 85,000 vehicles per month. Without more promotions, new orders from the domestic market could return to normal in December, at about 25,000 units per month. Obviously, Tesla's new production cannot be absorbed entirely by exports.

Meanwhile, Tesla is facing increasing competition in China, the world's largest electric vehicle market, from local automakers such as BYD and Guangzhou Automobile Group, which are raising prices. BYD set a sales record for the ninth consecutive month in November, delivering more than 230,000 vehicles, including nearly 114,000 pure electric models.

Tesla's reliability has also become the focus of attention again. Tesla has issued two recalls in China in the past month for in-flight software upgrades and maintenance on some vehicles. A recent fatal crash involving a Model Y that killed two people has also reignited discussions about Tesla's safety record.

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