Tesla Halts Auto Production at Shanghai Plant in Rare Christmas Suspension

On Saturday, Tesla told some of its Shanghai employees that it would stop car production that day, a day earlier than originally planned, the people said. The company earlier told staff that production would resume on Jan. 2, they said.

One of the people said that while it isn’t unusual for auto makers to pause work on some production lines during the Lunar New Year holiday and the summer, Tesla hasn’t traditionally halted all car production during the Christmas holidays.

Tesla has built up sufficient inventory and the production halt won’t hurt its ability to fulfill orders, the people said. During the summer, Tesla boosted the capacity of its Shanghai plant to more than 750,000 vehicles a year. However, demand for its cars has been weaker than expected over the past two months, they said, as China’s auto market turned sluggish.

Tesla buyers in China currently can receive their new vehicles within four weeks, compared with September, when the wait was up to five times as long, according to the company’s website.

Tesla didn’t respond to a request for comment. On Sunday, the company told the Global Times, a news outlet run by China’s Communist Party, that it had planned for annual maintenance of its car-manufacturing lines in Shanghai this week, and that workers would take a break during the period. Tesla said it wouldn’t shut the workshop that manufactures charging piles during this period, according to the Global Times report. Reuters earlier reported on the suspension.

Covid-19 infections have washed over China in recent weeks after Beijing eased its zero-Covid policies, taking down workers at car makers and their suppliers, as well as dealership staff. Fewer potential customers have been visiting stores as worries of being infected remain elevated.

Tesla’s Shanghai plant was forced to shut down for weeks earlier this year because of Covid-19-related disruptions, prompting Wall Street to temper its expectations for the car maker’s growth this year.

Demand in the world’s biggest auto market has been weak since October, as Beijing’s stringent Covid-19 control measures forced businesses to shut and confine potential buyers at home. Car sales in November fell 9.2% from a year earlier, according to official data.

The China Passenger Car Association on Friday forecast nationwide car sales in December to grow by 4.5% from a year earlier, a relatively modest growth rate given the year-end expiration of subsidies meant to make EVs more attractive. EV sales, a growth engine for China’s car market, have significantly slowed since June.

In the third quarter of the year, Tesla said it produced 22,000 more cars than it delivered globally, fueling concerns of slack demand, especially in China. The company has lost roughly 70% of its market value since its stock hit a record high in November 2021, partly as a result of anxieties around weakening demand for EVs.

Tesla Chief Executive

Elon Musk

said Thursday on a Twitter Spaces chat that he expected the global economy to fall into a “serious recession” in 2023, pulling down demand for big-ticket items. He said Tesla’s gross profit margin has been higher than its peers, which gives it room to maintain sales growth by slashing prices. The car maker has doubled the discounts offered on its two most popular models delivered in the U.S. this month.

In China, Tesla cut prices in the fall as

Warren Buffett

-backed

BYD Co.

widens its lead over Tesla. The American EV maker is offering various incentives to move cars off lots before the new year.

Tesla’s Shanghai plant accounts for more than half of the company’s global car deliveries. During the five months from July to November, Tesla sold more than 332,000 Model 3s and Model Ys from the Shanghai plant, 44% of which were exported to markets outside China, according to data from the car association.

Write to Raffaele Huang at [email protected]