Why Tesla is cutting production of Model Y in China

Tesla has slashed production of its best-selling Model Y electric car at its Shanghai plant by a double-digit percentage since March, according to industry data and a source. This move comes as Tesla grapples with weakening demand for the Model Y in China, its second-largest market.

Reasons for Tesla's production cuts

• Weakening Demand

Data shows a decline in Model Y production compared to last year. This suggests softening demand for the car in China is likely due to increased competition - brutal price war has broken out between electric vehicle makers in China; economic slowdown - China's economic slowdown may be impacting consumer spending on electric cars. Also Model Y may be facing competition from newer electric vehicle models.

• Shifting Focus

Tesla may be strategically reducing Model Y production to focus on robotaxis, hinting at a potential shift away from electric cars. The company recently removed its goal of delivering 20 million vehicles annually by 2030 from its impact report. Which suggests a potential shift away from focusing solely on electric car production, with a possible pivot towards robotaxis and artificial intelligence as new revenue streams.

Tesla Production Cuts

Tesla's Shanghai plant, the company's biggest manufacturing hub globally, reportedly planned to cut Model Y output by at least 20% during the March to June period. Data shows that Model Y production in China was down 17.7% in March and 33% in April compared to the same months last year.

It's unclear if the production cuts will extend beyond June or impact other Tesla models or factories.

Impact on Sales Targets

Despite the production cuts, Tesla aims to maintain its sales targets of 600,000 to 700,000 cars in China for 2024. Globally, Tesla aims to sell 2 million electric vehicles this year. To boost sales, Tesla recently slashed Model Y prices in China and offered interest-free financing to Model 3 buyers.

Tesla's Market Share Decline

• Tesla's share of China's electric vehicle market has fallen to 6.8% in the first four months of 2024, down from 7.8% for all of 2023.
• BYD leads the Chinese electric vehicle market with a 34.3% share for the first four months of the year.

Tesla Technical Analysis

There are two key areas that might act as support for the price, potentially preventing it from falling further.

Strong Support Zone (168.46 - 173.73): This zone combines trend lines and 50 moving average. This confluence of factors suggests a strong buying interest around this price range.

Secondary Support (145.40): This is another potential floor for the price based on a trend line identified on the weekly chart. If the price falls below the strong support zone, this level might offer some temporary cushion.

On the other hand, there are six potential obstacles that the price could face if it tries to rise.

Major Resistance Zone (174.04 - 177.78): Similar to the support zone, this is an area with multiple trend lines and key moving averages acting as potential resistance.

There are four resistance levels identified from daily and weekly charts using trend lines and horizontal lines.

181.52, 190.48, 194.59: These resistance levels might be individually less strong than the zones, but they could still pose challenges for the price.

215.87 and 240.14: These are strong resistance levels, if the price manages to overcome all the previous levels of resistance, these levels could be significant challenges.

Overall

Tesla has cut production of its Model Y electric car in China due to weakening demand and a potential strategic shift towards robotaxis. The company is facing increased competition from other electric vehicle makers and an economic slowdown in China. Despite the production cuts, Tesla is maintaining its sales targets for 2024 and has taken steps to boost sales, such as price cuts and financing offers. Tesla's market share in China has declined, and the company's stock price faces both potential support and resistance levels in the near future.