As rumored earlier this month, the Tesla Giga Shanghai plant in China has suspended production before the end of the year.
Reuters reports that the production was paused on Saturday, which is slightly ahead of the previous plan to pause most work at the plant in the last week of December (December 25-January 1). The article is based on Reuters’ unofficial sources – “an internal notice and two people with knowledge of the matter.”
There is no official comment or answer as to why Tesla temporarily suspended production. According to Reuters, is not an established practice for the plant to shut down for a year-end holiday and did not happen a year ago.
Two possible reasons were mentioned. The first are COVID-related issues:
“The suspension comes among a rising wave of infections after China eased its zero-COVID policy earlier this month…”.
“One of the people said workers at Tesla and its suppliers have also been falling sick as part of this wave, posing challenges to operations in the past week.”
The second, which we think is very important, is that the demand for Tesla vehicles in China might not be high enough to match the plant’s upgraded manufacturing capacity.
Reuters specifically says that inventory levels increased and we previously reported about lowered prices, insurance-related incentives and new discounts as well as very short delivery times for new orders of Made-in-China (MIC) Tesla Model 3 and Tesla Model Y.
We must also note that the 11,088 CNY (almost $1,600) subsidy for BEV comes to an end with the end of the year, which means that the beginning of the year might be slower than a year ago (on top of the usual slowdown, related to the Chinese holidays in January/February).
Nonetheless, there is nothing catastrophic to worry about, but rather active adjustments. The market situation is very dynamic and the year 2022 was pretty challenging due to a variety of reasons – from COVID (China), chip supply issues, economic issues to name just a few.
Despite all of that, Tesla Giga Shanghai managed to produce probably more than 700,000 electric cars (we don’t know the final number yet) – so at least 50+ percent more than a year ago. We strongly believe that after the upgrades conducted last summer, the plant might be able to produce more than 1 million electric cars at full capacity. That’s the world’s largest single electric car factory.