Elon Musk, CEO of Tesla Inc (TSLA), has dismissed reports claiming his electric vehicle company is facing challenges in China due to increasing competition from domestic automakers and fierce price wars. Musk, in a recent post on X (formerly Twitter), asserted that Tesla’s Shanghai factory is operating at full capacity, labelling the reports as ‘silly’.
Tesla’s second-quarter shareholder report revealed that the Shanghai gigafactory has an annual production capacity exceeding 950,000 vehicles, translating to a daily maximum capacity of approximately 2,603 vehicles. This statement directly contradicts the reports of production struggles.
Despite Musk’s reassurance, Tesla’s sales figures in China have shown a decline in 2023. The company sold 86,697 China-made EVs in August, which includes both exports and domestic sales. While this represents a 17% increase compared to July and a 3% year-on-year growth, it pales in comparison to the sales of its biggest rival, BYD Co.
BYD sold a staggering 148,470 battery electric passenger vehicles and 222,384 plug-in hybrid passenger vehicles in August. The Chinese EV giant has significantly surpassed Tesla’s sales in the Chinese market.
Tesla’s Shanghai factory produces both the Model 3 sedan and the Model Y SUV. These vehicles are sold within China and exported to various international markets, including Europe. In the first eight months of 2023, Tesla China sold a total of 587,437 vehicles, representing a 6.01% year-on-year decrease. This decline, coupled with the company’s aging lineup in a market where newer and more affordable models are being rapidly introduced, has fueled concerns about Tesla’s competitiveness in China.
However, Tesla is reportedly planning to introduce a six-seat version of its Model Y SUV in China starting next year. This move could help the company regain market share in the highly competitive Chinese EV market.
In its second-quarter earnings report, Tesla dismissed the impact of intense competition in China, stating that its cost structure and focus on core functionality, including autonomous driving, will position the company favorably for long-term success.
While Tesla maintains its commitment to the Chinese market, the company faces a significant uphill battle in maintaining its market share amidst the growing competition and changing consumer preferences. Only time will tell if Tesla can overcome these challenges and remain a dominant force in the world’s largest electric vehicle market.
