Tesla’s sales in China dropped 64% month-on-month in July 2022 due to manufacturing disruption caused by the planned upgrades at the company’s manufacturing plant in Shanghai. According to China Passenger Car Association (CPCA), Tesla delivered 28,217 electric vehicles (EVs) from its Shanghai plant in July 2022 in comparison to 77,938 electric vehicles delivered in June 2022. The company’s share price fell marginally in pre-market trading after CPCA reported a steep decline in July 2022 sales.
Production Affected by COVID-19
Tesla had a challenging year following the COVID-19 lockdown and an upgrade at its Shanghai gigafactory that partially halted production in July 2022. The upgrade at Tesla’s manufacturing facility comes following production losses caused by a COVID-19 lockdown for two months in Shanghai, which reduced the company’s revenue in the second quarter of 2022. According to Tesla, the Shanghai plant is now the company’s largest factory in the world by installed capacity, equipped to manufacture more than 750,000 vehicles annually. The plant would be capable of manufacturing more than a million EVs annually once the upgrade is finished.
Growing EV Market in China
According to GlobalData, the market value of hybrid and electric cars in China stood at $36.3 billion in 2021 and it is expected to increase to $48.6 billion in 2022. The overall retail sales of new energy vehicles, including electric and hybrid vehicles, in the country increased 117% YoY in July 2022 as a result of government incentives, a recovery in supply chain, and growing demand for EVs due to higher prices of oil. In recent years, China promoted the development of EVs, providing monetary subsidies to manufacturers to increase production.
Tough Competition Ahead
While Tesla’s sales fell in July 2022, Chinese EV and battery manufacturer BYD regained the top rank with sales of 80,991 all-electric vehicles, indicating an increase of 16% over that in June 2022. Nio and Xpeng delivered 10,052 and 11,524 all-electric vehicles, respectively. In addition, several lesser-known Chinese startups are becoming more prominent in a larger field of rivals, with some of them posting record revenue, which indicates increasing competition in the new energy vehicles market.
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