EV major Tesla (NASDAQ:TSLA) has lowered electric vehicle output in China amid tepid sales. According to Bloomberg, the company asked employees in its Shanghai facility to work five days a week instead of the six-and-a-half days norm.
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In the first two months of 2024, China saw a 17% increase in passenger vehicle sales and a 37.5% surge in new-energy vehicle sales. Despite this positive trend, Tesla still experienced a decline in sales.
Lower Production of Tesla’s Best-Sellers
This move will mean lower production of Tesla’s Model Y SUVs and Model 3 sedans. While the overall passenger vehicle market in China is growing, competition remains fierce. Given the local competition from companies like BYD Co., Tesla heavily depends on its pre-2020 models, the Model 3 and Model Y.
Lowering EV production in its Shanghai facility might have occurred at an inopportune time, particularly because Tesla’s Shanghai plant exclusively produces the Model 3 and Model Y. The decision to scale back production in these popular models in China could potentially exacerbate the impact on Tesla’s deliveries.
Additionally, Japanese automakers Nissan (OTC:NSANF) and Honda (NYSE:HMC) are looking to lower their production capacity in China.
Is TSLA Stock Expected to Rise?
Tesla shares are down by about 3% today and nearly 30.5% so far this year. A combination of margin pressures and soft demand is expected to heavily weigh on Tesla this year. Analysts expect the automaker’s EPS to contract by around 1.6% in 2024. Despite these headwinds, the Street sees a 20.2% potential upside in Tesla shares, based on a Hold consensus rating and an average TSLA price target of $207.74.
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