There is some good news and some potentially bad news for Tesla (TSLA) in China.
According to Tesla China via Xinhua News Agency, the automaker shipped 100,291 electric vehicles from its Giga Shanghai plant in November — an all-time record and the first time it has surpassed 100,000 deliveries.
The figure represents a 40% monthly increase since October and a nearly 90% year-over-year increase. This follows monthly gains at Giga Shanghai after Tesla made upgrades in ramping up production at the plant.
However, it seems that the upgrades may have been too productive for Tesla, at least in the short term. Reports from Bloomberg and Portal suggest that Tesla will now be cutting production at Giga Shanghai, a possible sign that demand in the region is falling.
Tesla is set to make production cuts as early as this week, with the reduction estimated at about 20% of full capacity. Giga Shanghai was at full capacity in both October and November.
Bloomberg reports that the decision to cut production came “after the automaker assessed its near-term performance in the domestic market,” one of the people said, adding that there is flexibility to ramp up production if demand rises .”
However, Tesla has denied reports of a production cut in Shanghai. In a statement to Portal, Tesla said media reports claiming Giga Shanghai would cut production in December were “untrue.”
However, potential production cuts come after the automaker cut prices for its cars in China in early October and also increased insurance incentives to boost supply.
In addition, competition in China’s electric vehicle market, the largest in the world, is intensifying. BYD, backed by Warren Buffett, recorded nearly 230,000 deliveries last month, with nearly 114,000 electric vehicles and 116,000 hybrids.
From a pure production perspective, Gigafactory Shanghai is extremely productive and has delivered more than 650,000 vehicles so far this year, according to the China Passenger Car Association (CPCA), slightly surpassing last year’s total of 484,130. According to the CPCA, Giga Shanghai’s annual sales could potentially reach 750,000 units in 2022.
The story goes on
Even if Tesla cut production by 20%, the factory would be producing about 80,000 units per month, meaning it could theoretically hit nearly 1 million vehicles produced, making it the most productive EV factory in the world.
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Pras Subramanian is a reporter for Yahoo Finance. you can follow him Twitter and further Instagram.
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