Tesla will drastically cut production of electric cars at its Shanghai plant, which can produce 1 million cars a year, due to falling demand

The Tesla plant in Shanghai is having a difficult year. The company has been forced to cut back on car production here due to falling demand.

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The Shanghai factory has been suffering since mid-spring. In April, the plant's output was reduced due to a wave of quarantine restrictions in China related to the coronavirus. After that, Tesla halted some of the lines to carry out upgrades. This allowed the production of electric cars to increase to 1 million units per year, but now the plant is again unable to operate at full capacity.

More precisely, the capacity allows holding such rates of production, but now such volumes are not in demand. In this regard, the company of Elon Musk is forced to make unpopular decisions. Tesla will limit the production of "battery-powered cars" by 20% starting this week. Previously, such measures were applied only involuntarily.

The plant in Shanghai produces about 85,000 electric cars per month. However, Tesla is able to sell no more than 25,000 cars during this period. And demand is falling, even despite government subsidies and lower car prices.

The company will not be able to redirect to export cars that it will not be able to sell in China. The decision to reduce the production of electric cars is more profitable than sending the vehicles into storage.

Source: Bloomberg