Tesla Expects No Rapid Growth at Shanghai Factory in Near Term Despite Record Output in Q4

“Since our Shanghai factory has been successfully running near full capacity for several months, we do not expect meaningful sequential volume increases in the near term,”Tesla said in the Q4 financial report.

BEIJING, January 25  (TMTPOST)— Tesla tried to balance the slowdown anticipation of Shanghai Gigafactory, its key overseas production base, and the optimistic outlook of the company in long run. 

Source: Tesla

Each of Tesla’s vehicle factories achieved record high output in the fourth quarter of 2022, and the company continued a gradual shift towards a more even regional mix of both production and deliveries, according to a quarterly financial report released on Wednesday. Tesla said it continued to believe its operating margin will remain the highest among volume OEMs. Looking forward the coming year, it expects to remain ahead of the long-term 50% CAGR with the annual output of about 1.8 million vehicles.

Despite the record production and long-term growth forecast, Tesla admitted existing challenges, which were largely concentrated in China during the past year. “Since our Shanghai factory has been successfully running near full capacity for several months, we do not expect meaningful sequential volume increases in the near term,” the report wrote.

Reports at the end of 2022 have already highlighted the output slowdown at Tesla Shanghai factory, increasing concerns over weakening demand. The Shanghai plant was reported to extend its planned eight-day suspension by two days in late December, and extended its reduced production schedule into this month since it plans to run from January 3 to 19 and halt production from Jan. 20 to 31, compared with the public holiday period for the Chinese New Year from Jan. 21 to 27 of 2023.

As of December 31, Tesla missed the market estimates of delivery for a third straight quarter. Its total delivery of about 1.31 million units for 2022 not only failed to meet its own annual target of 1.5 million, but also was overtaken by BYD, whose annual sales suggest at least 500,000 vehicles delivered more than Tesla in the past year.

The China Passenger Car Association (CPCA) estimated Tesla Shanghai Gigafactory delivered a total of more than 710,000 vehicles in 2022, increasing 48% from the previous year. However, Tesla’s outstanding performance in China was at the cost of various forms of price wars. The U.S. electric vehicle (EV) giant has launched five rounds of promotion including price cuts and various subsidies, such as allows a one-time subsidy of RMB8,000 for qualified buyers’ final payment that announced in mid September.

Tesla started new wave of price cuts in the beginning of 2023. It slashed price by up to 13% in China on January 6, making the starting price of Model Y and Model 3 down to new low and about 43% and 30% cheaper than those on sale in U.S. Less than a week later, Tesla lowered prices across the U.S. Europe, the Middle East and Africa by as much as 20% on January 12, expanding its price war globally.

Tesla CEO Elon Musk seemed to give a relief to investors at the earnings call Wednesday. He noted recent price cuts triggered consumers’ interests and demand in January about doubled the production. "These price changes really make a difference for the average consumer," he told analysts.

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