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Tesla’s China Production Could Fall 33% in Second Quarter

The EV maker has set a target of 71,000 cars at its Shanghai plant for June. Added with 44,301 units produced in April and May, that would be about a third less than its first-quarter output


Tesla has laid off staff in Asia as it cuts back on jobs after an edict by chief executive Elon Musk that staff reductions were needed.
Tesla's actions are a concerning sign of the health of the global economy as markets contract, inflation soars and recession worries run rampant. File photo: Reuters.

 

Tesla‘s second-quarter production at its Shanghai “gigafactory” is likely to a slump by a third compared with the previous quarter, just as China’s commercial capital is hit by new lockdowns.

The US-based electric vehicle maker set a target of 71,000 vehicles at its Shanghai plant for June, according to an internal production memo.

Together with the 44,301 units it produced in April and May, according to data from China Passenger Car Association (CPCA), that would add up to around 115,300 units in the second quarter.

In the first three months of the year, Tesla Shanghai manufactured 178,887 cars, according to the CPCA.

Tesla did not immediately respond to a request for comment on Thursday.

Elon Musk, the company’s chief executive, said in a call with analysts in April that vehicle production at the Shanghai factory in the second quarter would be “roughly on par” with the first quarter.

“It’s also possible we may pull a rabbit out of the hat and be slightly higher,” he said then. But Musk more recently has been warning about the risks of a recession.

He told the whole company that it would be pretty intense quarter as the Covid-19 restrictions in Shanghai brought “a huge challenge” and the plant was only getting back to full production, news website Electrek reported on Thursday.

Last week, he told Tesla executives in an email he had a “super bad feeling” about the economy and needed to cut jobs by about 10% and freeze hiring.

In a follow up email to employees, he said Tesla had become “overstaffed in many areas” and that Tesla would reduce its salaried headcount by 10%.

But in a tweet on Saturday, he backtracked and predicted that the company’s total headcount would increase over the next 12 months.

Analysts have cautioned that Tesla’s first-quarter gross profit margin of almost 33% was unlikely to be sustained in the current quarter because of higher commodity costs and the Shanghai lockdown.

 

  • Reuters, with additional editing by George Russell

 

 

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

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