Tesla (TSLA) stock price falls due to reports that it is reducing EV production at Giga Shanghai

Tesla (TSLA) stock fell this morning after reports that the automaker was cutting electric vehicle production at its Gigafactory Shanghai due to falling demand.

Bloomberg reported that Tesla has eliminated a day and a half of work at its Gigafactory Shanghai.

Earlier this month, the U.S. automaker told employees at its Shanghai factory that it would reduce production of the two Tesla cars it makes in China, the Model Y and Model 3, and that they would be working on a weekly basis instead of the usual six-and-a-half days a week. Officials revealed that he was instructed to work for five days. The person spoke on condition of anonymity because he was not authorized to speak publicly.

The change was reportedly made earlier this month, but Tesla has not told employees when it plans to return to full capacity.

This comes after Tesla has apparently had more trouble than usual selling cars in China recently.

Early this week, Electrek It was reported that Tesla is offering larger discounts and incentives than usual to customers who want to take delivery of their cars by the end of the month.

A Bloomberg report claims that the reduction in production capacity extends beyond Model 3 and Model Y production to other parts of the factory.

Some production lines at Tesla’s Shanghai factory, including the battery factory, will be subject to a longer shutdown, one of the people said. Tesla has told employees and some suppliers to prepare for extended production restrictions through April. In early April, China celebrates Tomb Sweeping Day, a time when consumption is usually quiet.

In addition to difficulty selling its current inventory, Tesla’s sales of Chinese-made cars have also declined this year.

Tesla delivered 131,812 cars in the first two months of 2024, down 6% from the same period last year, the China Passenger Vehicle Association said. Moreover, only 53% of these Chinese-made cars were sold in China. Tesla exported the rest.

Competition in China is extremely fierce, and Chinese EV manufacturers are offering cheaper EVs and improving quality.