Tesla China Responds to Rumored One-Week Production Halt at Shanghai Gigafactory

Production at Tesla’s Shanghai production facility was suspended on December 24, according to an internal notice and two people familiar with the matter cited by Reuters. It was also previously reported that the US auto giant plans to suspend production of its Model Ys at the plant from December 25 of this month to January 1 next year.

Regarding the matter, Tesla China responded to local media outlet Global Times on December 25, saying, “The Shanghai factory still maintained efficient production and output in 2022. The vehicle production will carry out the annual production line maintenance work as planned next week, and the workers will have a rest during the production line maintenance period after one year’s hard work. Workshops producing charging piles and other auto parts have not stopped the line. It is not completely accurate to say the factory has been shut down.”

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Production was previously suspended at Tesla’s Shanghai factory as a sharp increase in COVID-19 cases made it difficult for workers to show up under China’s zero-COVID policy. At the same time, Tesla is also facing a problem of increasing inventory. As Tesla’s second-largest market in the world, the Chinese market is facing downward pressure. According to sources, in the past week, the production capacity of the firm’s Shanghai factory was mainly used to produce export models.

Gigafactory Shanghai is Tesla’s most important manufacturing center currently, and a considerable part of its production capacity is supplied for overseas exports. According to data from the China Passenger Car Association, Tesla’s sales in China increased by about 60% in the first three quarters of this year. About 60% of its electric vehicles produced in Shanghai are sold domestically, and the rest are exported to overseas markets such as Australia, Europe, Japan and Singapore.

Zhang Junyi, a managing partner of Oliver Wyman, told Yicai, “There are many reasons for a factory to suspend production, such as adjusting equipment and production lines.” He also predicted that the suspension of production for a week would have limited impact on Tesla’s supply because its inventory should be sufficient.

In October this year, Tesla stated in its quarterly financial report that its 50% sales growth target this year might not be achieved. Since the third quarter of this year, its production capacity has rarely exceeded delivery. In the third quarter, the company delivered a total of 343,000 electric vehicles and produced 365,000 electric vehicles.

Tesla continues to expand in the Chinese market. It recently announced that the 10,000th super charging pile in China was built on December 2. In August this year, the millionth vehicle made at Tesla’s Gigafactory Shanghai rolled off the production line.