Behind the shutdown of Tesla's Shanghai plant

"The charging pile and other workshops are not offline, and the media's claim that the factory is shutting down production is inaccurate." On December 26, the person in charge of Tesla China told China Newsweek, "The Shanghai factory 2022 still maintains efficient production and excellent output. The whole vehicle production is on schedule this week for the annual production line maintenance work, while the workers have been working hard for a year, so they are also taking a personnel break during the production line maintenance."

As the industry wind vane, Tesla's every move is strongly concerned by the outside world. Prior to that, Reuters news agency sources said that according to an internal notice and two people familiar with the matter, Tesla's Shanghai factory had suspended production on December 24. Combined with Tesla's recent news of sinking stock prices and model price cuts to make concessions, outsiders questioned the problem of weak demand for Tesla's models.

The aforementioned person in charge of Tesla China said that the maintenance of Tesla's production line is "normal action". But Reuters believes that the suspension of production during the year-end holidays is not the usual practice of Tesla's Shanghai plant, which was kept running normally during the last week of December last year. However, there is also information that some U.S. car companies will cooperate with the Christmas and New Year's Day holidays, stopping production lines for about a week.

Data show that Tesla's Shanghai Giga plant exceeded 100,000 deliveries in November, a figure that set a new record for monthly deliveries. Meanwhile, Tesla announced on Dec. 26 that the 10,000th Supercharger in mainland China was inaugurated and put into service in Shanghai.

A wild ride

According to the China Passenger Vehicle Market Information Joint Association, the cumulative deliveries from Tesla's Shanghai Giga factory reached 650,000 units in the first November, far exceeding the 484,100 units to be delivered in 2021.

According to the data, after the expansion of Tesla's Shanghai Giga plant, the annual production capacity has exceeded 750,000 units, making it Tesla's number one global super factory. At present, the localization rate of the industry chain of Shanghai Giga factory has exceeded 95%. Tesla CEO Musk has said that Tesla's Shanghai Giga factory has produced 1/3 of its total production of Tesla.

According to TrendForce Tibco's research, in the third quarter, Tesla sold 344,000 units worldwide, with a 16% market share of pure electric vehicles, topping the best-seller list. BYD ranked second with 259,000 units of pure electric vehicle sales.

However, the sales of the Tesla all the way to run wild is still under pressure. Data show that Tesla 2021 global achieve nearly 940,000 units of annual sales. At the time of last year's full-year earnings announcement, Tesla set a goal of 50% annual sales growth to achieve 1.5 million sales in 2022. According to data released by Tesla, in the first three quarters of this year, it delivered more than 900,000 electric vehicles worldwide, which is close to last year's full-year sales, but still a bit short of its goal.

In order to achieve the target, Tesla has recently conducted sales stimulus measures in several markets. In the U.S. market, Tesla's initial concession policy was to offer a $3,750 discount to customers who picked up their cars in the U.S. in December; then, Tesla decided to offer 10,000 miles of free Supercharging service to customers who picked up their cars that month; recently, Tesla raised the discount to $7,500, equivalent to the full tax credit for U.S. electric cars that will take effect next January. Data shows that Tesla has a 65 percent market share of newly registered electric vehicles in the U.S. as of the third quarter of this year, making it the most popular electric vehicle brand in the country. But Tesla's market share this year is lower than the 71% of the same period last year. 2020, Tesla's market share in the U.S. peaked at 79% even once.

At the same time, Tesla has more than once introduced price reductions in the Chinese market, including insurance subsidies. In October this year, Tesla adjusted the price of Model 3 and Model Y. In December, Tesla offered insurance concessions, points and other preferential measures.

Tesla's concessions have stimulated market demand to a certain extent. According to the data of the Association, the delivery volume of Tesla's Shanghai Giga factory reached 100,291 units in November, an increase of about 40% from the previous year and 89% from the previous year. Currently, Tesla's Shanghai Giga factory mainly produces two models, Model 3 and Model Y. Among them, Model Y ranked first in overall passenger car deliveries with 69,000 units sold in November.

Tesla's Shanghai Giga plant is an important part of its global production and manufacturing sales, carrying the important task of Tesla's high growth. According to the previous delivery pattern, it prioritizes exports at the beginning of the quarter and ensures local deliveries at the end of the quarter. Currently, Tesla's Shanghai Super Factory supplies overseas markets such as Japan, Australia, New Zealand and Singapore, and has become an important "export center" for Tesla globally.

Market Value Retreat

It is worth noting that the market value of Tesla, which was previously "overvalued" and "deified", has fallen significantly recently.

Tesla's market capitalization once topped $1 trillion, which was more than the combined market capitalization of the world's 12 largest automakers at the time. But now, Tesla's total market value is $388.9 billion, which has fallen out of the top ten positions of global listed companies in terms of market value. So far this year, the cumulative decline in Tesla's share price has expanded to more than 65%, with market value evaporating $723.5 billion (about RMB 5.06 trillion). And this December was also the worst month for Tesla's stock performance. Tesla's market value evaporated $219 billion this month, which is almost equal to the market value of Toyota, the second largest car company.

Some institutions believe that Tesla's stock price mainly reflects Musk's negative impact on the series of Twitter acquisition events. Musk said he would resign from the position after finding a suitable CEO candidate for Twitter. Some analysts also believe that Tesla's growth is not as fast as expected, causing the market value to fall. Musk, for his part, responded to investors on Twitter on December 20, saying that the drop in Tesla's share price was related to the withdrawal of capital market funds.

However, despite the current big drop in market capitalization, Tesla is still far ahead of other automakers, equal to the combined total of Ford, GM and Toyota, while its car sales in 2021 will be only 5% of the Big Three. Gordon Johnson, head of investment research firm GLJ Research, Tesla's biggest short-seller, believes that Tesla shares will also fall in 2023 because Tesla's valuation is still overvalued by investors compared to other electric car companies.

Notably, Musk has sold more than $39 billion of Tesla stock since the company's market value peaked. on Dec. 22 after the bell, Musk made a promise to investors on Twitter Spaces that he would not sell any Tesla stock for the next 18-24 months, "I promise I won't sell any Tesla stock for at least two years from now will not sell Tesla stock, and I will not sell under any circumstances next year."

Meanwhile, Musk said that the U.S. economy will fall into a "severe recession" in 2023, which will affect the real estate, automotive and other industries. As early as June this year, Musk said "the economy feels very bad", asked Tesla executives to suspend all hiring, and lay off 10% of the workforce. Now it seems that Musk's judgment of the economic trend, and nothing has changed.

So, Musk can lead Tesla to avoid this "serious recession"?