Tesla (TSLA) faces more rumors that it is cutting production in China

Tesla (TSLA) is again facing rumors that it is cutting production in China amid lower demand, even after cutting prices on its electric vehicles.

Over the last few months, Tesla has pulled on several “demand levers” to boost demand in China.

We reported in October that Tesla reduced the price of the Model 3 and Model Y in China and launched a new referral program. It was the first time in two years that Tesla cut prices on its electric vehicles.

Later, the automaker also launched a new cash rebate with its insurance partners in China.

It led to reports that Tesla suffers from a demand drop-off in the country. The automaker denied those rumors last month, but without providing any evidence.

Earlier this week, the rumors began circulating with Bloomberg claiming that Tesla was now planning to reduce production output at Gigafactory Shanghai by 20% in December. Tesla China said the report was “untrue” without going into details.

Now Bloomberg is doubling down with a new report going into more detail about Tesla cutting production at the factory:

Tesla Inc. will shorten production shifts at its Shanghai factory as soon as Monday and has delayed the on-boarding of some new hires, people familiar with the situation said — adding to signs demand for the company’s electric cars in China isn’t meeting expectations.

The report claims that Tesla is cutting its 11 1/2-hour shifts into two 9 1/2-hour shifts per day starting Monday, according to a schedule seen by Bloomberg. The shorter shifts will reportedly lead to reduced monthly pay income for the Gigafactory Shanghai production staff.

The publication says that Tesla China declined to comment on the report.

Electrek’s Take

Many Tesla fans think that once Tesla or Musk calls a media report “untrue,” that’s the end of it. It’s untrue and it has been shut down, but it’s not that simple.

Top comment by dmce

Liked by 5 people

There are many separate functions that go into making a car: stamping, casting, body in white welding, painting, general assembly. I know for a fact that the Fremont factory has different work schedules for these various elements because not all need to be operating 24/7 to maximize production. Production is limited by the throughput in cars or parts per hour of the slowest element.

Tesla recently upgraded production capacity in Shanghai by 25%. It's quite possible that one or more production elements are now more efficient than the slowest production element. That would result in a cutback in hours for the faster production steps. Bloomberg hears of a cut in production hours for part of the factory and concludes it is for the entire factory. Voila.

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I agree that Musk and Tesla are subject to a lot of nonsense in the media that needs to be denied, but from experience, I can say that Tesla and Musk are not always completely honest regarding media reports.

For example, when I reported that Tesla had selected Austin for its next Gigafactory in the US, the automaker leaked to three publications that Tulsa was still in the running, which wasn’t true:

At the time, we knew for a fact that Musk had greenlit the project to go to Austin; Tesla PR reached out to the publication off the record to try and muddy our report. We know because we have also been on the other side of that situation with Tesla.

In this case, with the additional information from Bloomberg and Tesla China now declining to comment, I think that there’s likely some truth to the reporting.

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