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Tesla's Giga Shanghai Isn't Shutting Down Production - It's Doing This Instead

Tesla Giga Shanghai was reported to be shutting down production for the last week of December. Some think this is a lack of demand. It's actually this.


Tesla Giga Shanghai - What Is Going On?

Tesla Giga Shanghai has been in the news quite a bit lately and for good reason. It's starting to output a lot of cars and there is a lot of news about shut downs due to illness. Lately, the subject is if Tesla can keep demand high for its vehicles or if they will have to cut costs.

A reliable source from China has stated that reports of Giga Shanghai and Tesla suspending production at its Shanghai plant are just not true. Instead, Tesla told the Global Times on Sunday that it is adding that the plant is carrying out annual production line maintenance as planned and workers will have a rest period.

It makes sense for Tesla to do its planned maintenance at the very end of a quarter in order to limit the amount of vehicles that are rolled over as inventory into the next quarter. They have to do maintenance at some point and now is as good as any time.

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Production Going Forward

Giga Shanghai continues to grow in production, reaching a run rate of about 1.2 million vehicles per year now. This is just with the Model Y and Model 3. Many of these are the RWD or standard range vehicles with LFP batteries.

The question is, can Tesla keep selling this and more with the current vehicle configurations, or will Tesla have to reduce prices in order to keep selling this high volume of vehicles.

I think Tesla will have to reduce prices slightly again, but Tesla is also making efficiency gains and reducing the cost of the current vehicles. Eventually, I do believe that Tesla will make a Model 2 or a Compact Model vehicle at this Shanghai plant and somewhere in South America.

Tesla will need a compact of some kind, whether it is the Robotaxi vehicle, or a vehicle similar to the Toyota Corolla if it is going to compete and drive many more millions of vehicle sales in China and around the world.

If Tesla is able to make a compact in the next couple years, then I think production will continue to scale well past 1.2 million into the multi-millions of vehicles. Let's see what Tesla decides to do.

Do you think Giga Shanghai will continue to scale production in China or will it slow down or will Tesla have to cut prices to keep deliveries going? Or will Tesla export more from China?

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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.

Image Credit, Tesla, Screenshot