Tesla Cuts Model Y Production in China Amid Fierce Competition

Tesla is cutting back on Model Y production in China due to increased competition and a slowing market, according to Barron’s. This move might impact Tesla’s second-quarter delivery expectations and raises concerns about demand growth.

Chinese EV Market Challenges

The Chinese electric vehicle (EV) market is highly competitive and showing signs of slowing down. Through April, Chinese automakers sold approximately 1.6 million battery-electric vehicles (BEVs), a 9% increase year over year. However, Tesla’s sales from its Shanghai plant fell by 7%, totaling about 283,000 cars. This decline caused Tesla’s market share to drop by about 3 percentage points, now sitting at around 17% of all BEV sales.

Global Growth Issues

Tesla’s global growth has been an issue in 2024. In the first quarter, Tesla delivered around 387,000 units, a nearly 9% decrease year over year. Wall Street projects second-quarter deliveries at 452,000 cars, a 3% decline compared to the previous year. This slowing growth has negatively impacted investor sentiment, with Tesla’s stock down 30% this year.

Market Outlook

Despite the recent slowdown, Tesla’s Model Y remains the best-selling BEV in China, with around 630,000 units sold over the past 12 months. Wall Street analysts are optimistic about a rebound in the second half of 2024, projecting 979,000 deliveries in the third and fourth quarters combined, a 6% increase year over year.

Stock Performance

On Friday, Tesla’s stock showed a slight uptick of 0.3% in premarket trading, reaching $174.29, while the S&P 500 and Nasdaq Composite futures also rose by about 0.3%.

EVXL’s Take

Tesla’s decision to cut Model Y production highlights the intense competition and dynamic nature of the Chinese EV market. Despite current challenges, the long-term outlook for Tesla remains positive, with expectations of recovery and growth in the latter half of 2024. The Model Y’s popularity in China underscores Tesla’s resilience and potential to navigate through a competitive landscape.

Photo courtesy of Tesla Motors.