Tesla reportedly cuts Model Y production at Shanghai plant

Tesla (TSLA) is cutting production of its Model Y vehicle at its Shanghai gigafactory, according to a report from Reuters. Tesla is facing a price war in China, with more rivals producing cheaper EVs.

In the video above, Yahoo Finance's Brad Smith and Seana Smith discuss the challenges Tesla is facing in China.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Stephanie Mikulich.

Video transcript

Tesla dialling back in China, the EV maker reportedly slashing production of its model Y in Shanghai.

This comes amid concerns of winning demand in the electric vehicle market.

Let's put one big number on this 20% potentially.

Here is what the production cut from model Y at G of Shanghai could look like between March and June of 2024.

And it seems like, according to a few reports out there, this is also being cross referenced up against some of the information or data from the China Association of Auto Automobile Manufacturers.

Yeah, Brad, I think this all just boils down to that waning demand that we've been talking about time and time again.

So Tesla, trying to right size the business there are at least better match what demand looks like when it comes to supply.

As a result, they're cutting just about 20% of that production output again.

That's according to the latest numbers that have been crunched here by Reuters.

But what more specifically, this points to one.

Obviously, this is happening in the midst of this price war that's been playing out not only in China but also what we've been seeing across the world and then to just Tesla is up again is facing an uphill battle.

When it comes specifically to the China market, you talk about the increasing popularity and the increasing market share that you have BYD.

You have a number of those domestic players that are continually putting more pressure on Tesla, making it tougher to compete within that region with with within that country.

And then also just the geopolitical tension between the US and China clearly could be a potential challenge not only for Tesla but a number of US larger US automakers here over the coming quarters over the coming years.

So again, with all that in context here you see Tesla making some adjustments to their production numbers, at least in China.

But we'll see what the material impact is going to be on their sales in the quarters to come.

I mean, you're spot on, and it's hard to compete when you've got one of your biggest competitors in that region that's receiving subsidies from the nation as well.

And so for China and the subsidies that they've been able to pass through to BYD for Tesla, regardless of the relationship that they've tried to strengthen in that region, not just among regulators and among some of the broader officials and figureheads there, but also among the consumer.

The consumer mindset also shifting, too.

And it's gonna come on a price point basis as well here, especially if you're recognising more of those cost savings on set as a consumer in buying a BYD versus a Tesla, then you're naturally going to gravitate towards one of those other options.

And, oh yeah, the broader industry is facing that slowdown in waiting demand as you were mentioning, too here.