During Chinese New Year Holidays, Tesla pauses production of electric cars in Shanghai

Illustration of Tesla factory employees. (photo: twitter @tesla)

JAKARTA - Tesla plans to reduce the production schedule at its Shanghai factory in January. According to a report reviewed by Reuters, the decision extends production cuts that began this month into next year.

According to Reuters, Tesla will run production for 17 days in January between January 3 and January 19 and will halt production of electric vehicles from January 20 to January 31 for the long Lunar New Year break.

Tesla did not explain the reasons for the production slowdown in its plans. It is also unclear whether work will continue off the assembly line for the Model 3 and Model Y at the factory during the scheduled time off. There is no established practice yet for Tesla to close operations for an extended period of time over the Lunar New Year.

Meanwhile, Tesla itself did not immediately respond to a request for comment from Reuters.

Tesla shares fell 5.8% to $116 per share in premarket trading. Tesla shares have fallen 56% since early October as investors worry about sagging demand, including in China, and Tesla CEO Elon Musk's involvement on Twitter and the recent sale of Tesla shares.

Tesla halted production at its Shanghai plant on Saturday, December 24 advancing an already established plan to halt most work at the plant by the last week of December.

Tesla's latest production cut in Shanghai comes amid a surging wave of infections after China backed away from a zero-COVID policy earlier this month. The move was welcomed by businesses even though it has disrupted manufacturing operations outside of Tesla.

Like other automakers, Tesla has also faced falling demand in China, the world's biggest auto market. Earlier this month, Tesla offered additional incentives for buyers who owned vehicles in December. The company has also slashed the price of its Model 3 and Model Y cars by up to 9% in China, in addition to subsidies for insurance costs.

Brokerage China Merchants Bank International (CMBI) said in a report issued last Tuesday that Tesla's average daily retail sales in China from December 1 to December 25 fell 28% from a year earlier. Tesla recorded 36.533 retail sales in China from December 1 to December 25.

The brokerage, which tracks retail auto sales data week by week in China as a snapshot of demand, said industry-wide sales were up nearly 15% by the same metric through December 25. Average daily sales for BYD, Tesla's bigger electric vehicle rival in China, were up 93% in the period.

Tesla's factory in Shanghai, the most important manufacturing hub for Musk's electric vehicle company, continued normal operations during the last week of December last year and took a three-day holiday for Chinese New Year.

The period January 21 to January 27 in 2023 is a public holiday in China for Chinese New Year.

Tesla's factory in Shanghai, a complex that employs around 20,000 workers, accounts for more than half of Tesla's output in the first three quarters of 2022.

Tesla has set a target for 50% growth in electric vehicle output and deliveries by 2022. Analysts expect output to fall short of that target by around 45%, based on forecasts for the fourth quarter which is about to end.