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Elon Musk explains why Tesla’s China sales plunged in July

Shanghai Gigafactory 3 body shop. Source: Tesla


Tesla has tripled EV production from its Shanghai gigafactory since 2020 and is on track to full capacity production, new figures reveal.

But local Tesla sales plunged in China in July, where just 8,621 Model 3s and just under 33,000 Model Ys manufactured at its Shanghai factory made it onto local roads.

But while this was portrayed as a major negative by some in the media, it is simply a reflection of Tesla’s manufacturing and delivery strategy: Export early in the quarter and deliver local late in the quarter.

And figures released this week by the China Passenger Car Association (CPCA) show it was a record export month for Tesla’s Shanghai factory.

As Tesla CEO and co-founder Elon Musk explained on Thursday (US time) in response to disruptive analyst and known Tesla bull Cathie Wood: “Tesla makes cars for export in first half of quarter & for local market in second half.”

Around 7,500 Model 3s bujilts in Shanghai have reached Australia in the past seven months, and 1,200 in July alone,  accounting for around 5% of Tesla’s China exports.

The tweet came after fellow Ark Invest analyst Sam Korus shared a chart illustrating Tesla’s production/export pattern against EV sales by China automakers Nio, Xpend and Li Auto. He described it as “feeding the world EVs”.

tesla china production exporttesla china production export
Source: Sam Korus/Twitter

Though Musk had previously said that cars made at its Shanghai gigafactory would be only for the wider Asian market, in October documents revealed that it was also moving to export cars from there to Europe while it finished making its Berlin factory.

But Musk also now notes that production is currently limited by chip chain issues, a problem that is challenging the global market.

As publicly disclosed, we are operating under extreme supply chain limitations regarding certain “standard” automotive chips. Most problematic by far are Renesas & Bosch,” he said.

Bosch is the largest supplier of car parts according to Reuters and has warned that the semiconductor shortage would affect integrated circuits, automotive microcontrollers as well as application-specific integrated chips.

Renesas, which is headquartered in Japan and makes microcontrollers for the automotive market hald a 17% market share as the second-largest such company in 2020. A fire at its plant northeast of Tokyo caught fire in April, causing it to look to Taiwan for alternative production arrangements according to Japan Times.

 

At its Q2 2021 earnings report Tesla said it has production capacity for more than 450,000 EVs at its Shanghai gigafactory. As reported by the China Securities Times, the annualised output of Model Y and Model 3 in this factory has now reached 450,000.

Bridie Schmidt is lead reporter for The Driven, sister site of Renew Economy. She has been writing about electric vehicles since 2018, and has a keen interest in the role that zero-emissions transport has to play in sustainability. She has participated in podcasts such as Download This Show with Marc Fennell and Shirtloads of Science with Karl Kruszelnicki and is co-organiser of the Northern Rivers Electric Vehicle Forum. Bridie also owns a Tesla Model 3 and has it available for hire on evee.com.au.



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