This move by the Austin-based company is unexpected to say the least. Without giving too many details on the reasons behind this choice, Tesla announced its intention to reduce production at its Shanghai factory in January.
According to Reuters, the company headed by Elon Musk intends to extend the wave of production reductions that began this month, until 2023. Many comments have arisen after the unveiling of this funny schedule. Especially since the company has just started delivering its first electric trailers.
A shutdown schedule that breaks with the habits of society
Tesla’s Shanghai factory and its approximately 20,000 workers is by far Tesla’s most important manufacturing center. According to the plan established by the company, the Shanghai factory should experience a shutdown from January 20 to 31. Obviously, this should not cause any surprise since the period from January 21 to 27, 2023 is traditionally a public holiday in China due to the New Year. But this is only in appearance, because it is indeed the first time that the company is going to carry out an extended shutdown of its production of electric vehicles.
Reuters, which has taken note of this timetable, points out that Tesla did not mention the reasons underlying this decision to stop. This should largely impact the assembly lines of the Model 3 and Y. Some will rightly say that Tesla is playing with fire, because last Tuesday the broker China Merchants Bank International (CBI) published a report gripping about the Austin-based company’s sales status. Indeed, this report shows that Tesla’s average daily retail sales in China, from December 1 to 25, were down 28% from a year earlier.
An unfavorable economic context would explain this choice
There is no smoke without fire and this decision tending to the decline in Tesla’s productivity can be explained through various factors. All have to do with the unfavorable economic environment that the company has been experiencing for some time.
Indeed, the news surrounding the fall of Tesla stock, down 56%, did not escape many observers. Since the beginning of October, a wind of panic has been blowing over the Tesla house. This created some hysteria among investors. Many of them expressed their anguish to Elon Musk. This was notably cited as partly the basis of this dilution of the company’s stock market value.
And since misfortune never comes alone, the harmful socio-political context in China linked to popular demonstrations against the zero Covid policy has undermined the production activity of several assembly plants in the country. As proof, Tesla’s latest production cuts in Shanghai came during this troubled period. Thus, like other car manufacturers, Tesla has noted a decline in demand. This forced him to set up incentive measures, such as reducing the price of Model 3 and Model Y cars by up to 9%.