Tesla in for further setback after losing EV crown to BYD, as some production is suspended to upgrade Shanghai assembly line

Giga Shanghai is expected to see about a 30 per cent jump in output following the upgrades
Temporary production halt will give Chinese EV firms an opportunity to increase their market share, analyst says

Tesla

Daniel Renin Shanghai

Published: 6:30pm, 6 Jul, 2022

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Tesla, which was this week dethroned as the world’s largest electric vehicle (EV) producer by sales, is set for another setback after some production was suspended at its Gigafactory 3 in Shanghai for upgrades to its assembly line.

The US carmaker has temporarily halted some production at the facility, which is also known as Giga Shanghai and is its largest manufacturing base worldwide, according to state-owned Shanghai Securities News. Two supply chain officials at the company, who spoke on condition of anonymity, confirmed the news on Wednesday. Tesla declined to comment when approached by the Post.

The facility is expected to see about a 30 per cent jump in output following the upgrades and will be able to churn out 22,000 units a week starting in August.

Giga Shanghai delivered 484,130 vehicles in 2021, representing 51.7 per cent of Tesla’s global total last year. The carmaker is expected to report a sharp fall in production and delivery of its bestselling Model 3 and Model Y EVs this month.

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“A temporary production halt at Gigafactory 3 will give Chinese smart EV builders an opportunity to increase their market share,” said Eric Han, senior manager at business advisory firm Suolei in Shanghai.

Shenzhen-based BYD, which is backed by Warren Buffett’s Berkshire Hathaway, has already stolen a march on Tesla. It sold more EVs between January and June this year to emerge as the largest electric cars manufacturer worldwide, a first for a Chinese firm.

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BYD sold about 641,000 new energy vehicles, a category that includes pure electric and plug-in hybrid cars, in the first half of this year, beating Tesla’s 564,000 units delivered in the same period. Most of the Shenzhen carmaker’s models are priced between 100,000 yuan (US$14,913) and 200,000 yuan, about half the price of Tesla’s Model 3s and Model Ys.

Li Auto and Huawei Technologies, other Chinese competitors of Tesla’s, have also been able to attract consumers in greater numbers. Beijing-based Li Auto received 30,000 pre-orders for its L9 SUV, which is priced at 459,800 yuan, within three days of its launch on June 21.

This week, Huawei secured 20,000 pre-orders in four hours for its Aito M7, a large sport utility vehicle (SUV), which starts at 319,800 yuan and was unveiled on Monday.

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“In a long run, strong buying interest in large SUVs developed by two mainland companies portends heightened competition in the domestic smart EV market, which is currently dominated by Tesla,” said Suolei’s Han.

Giga Shanghai had already lost about 50,000 units in production between March 28 and April 18, during Shanghai’s strict Covid-19 lockdown. But its total loss could amount to 70,000 units, because a broken supply chain foiled Tesla’s attempts to fully restore capacity even after it restarted operations on April 19.

The US carmaker has no plans to launch new models this year, as it focuses on coping with supply chain constraints.

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Concerns about Beijing’s zero-Covid strategy remain. Alixpartners, a global consulting firm, said in a research report last month that Covid-19 outbreaks and strained supply chains would drag down the growth of China’s EV sector throughout this year.

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