Tesla has made the decision to extend the production shutdown at its Shanghai factory. An unusual measure for the company, while demand for its vehicles has fallen sharply in recent months.
The wave of Covid-19 is wreaking havoc in China
While Tesla shares on the stock market are experiencing a dizzying fall (-70% since the start of the year), Elon Musk’s firm announced, this Saturday, December 24, the shutdown of production at its largest factory in the world. The company was initially to shut down its plant on December 25 for a period of eight days, but she finally preferred to do it a day earlier than plannedreport it the wall street journal.
The move comes as China suffers a huge wave of Covid-19, after President Xi Jinping decided to end the zero Covid policy. Many factory workers are infected, while fewer potential customers visit stores for fear of being infected.
The situation is exceptional for Tesla: while it is not unusual for car manufacturers to halt work on certain production lines during the end of the year and summer holidays, Elon Musk’s company never halted production of all its cars during the Christmas holidays. She indicated that she used this period to carry out maintenance work in the factory, and that she had built up sufficient stocks to fulfill her orders.
Tesla’s Shanghai factory accounts for more than half of the company’s global electric vehicle deliveries. In the July-November period, the automaker sold more than 332,000 Model 3s and Model Ys from there, 44% of which were exported to markets outside China.
The year 2023 promises to be just as complicated
China’s auto sector is on the decline, directly impacting demand for Tesla vehicles. On top of that, the company’s Shanghai factory had no choice but to shut down for several weeks earlier in the year as China imposed a very strict lockdown.
Tesla has decided to lower its prices in the country in order to attract more customers, when its great rival in the Middle Kingdom, BYD, continues to dominate the market for electric vehicles. Forced to revise its sales targets downwards, Tesla should experience a complicated situation throughout 2023 as well.
During a Spaces on Twitter, Elon Musk recently said he expects the global economy to fall into a ” serious setback ” next yearresulting in reduced demand for the affected products. He did not add that Tesla’s gross margin was higher than that of its peersallowing it to maintain sales growth using pricing.