Market turmoil and fierce competition affect everyone, either directly or indirectly. It seems that Tesla is now experiencing some challenges in China, too.

According to Bloomberg (and CnEVPost), Tesla reduced production output at its Giga Shanghai factory in China amid sluggish growth and an ongoing price war. The unofficial report is based on input from “people familiar with the matter.”

The article says that in mid-March, Tesla instructed employees to reduce production of the Model 3 and the Model Y from the usual 6.5 days to 5 days per week, although the lines will continue to operate on two daily 11.5-hour shifts.

Let’s recall that the Tesla Giga Shanghai is the world’s largest all-electric car factory. In the past, it was responsible for roughly half of Tesla’s global sales volume. According to the company’s Q4 2023 report, the Shanghai plant can produce more than 950,000 EVs annually, out of 2.35 million in total.

The report also indicates that parts supply is affected. Reportedly, Tesla limited production at some of its workshops and told some of its suppliers to prepare for extended production limits through April. April is expected to be a slower month for consumption due to the Tomb Sweeping Day in China.

In February, Tesla’s Made-in-China (MIC) EV wholesales decreased by 19% year-over-year to 60,365. If the demand is weakening, we will probably see another decline in March.

Interestingly, according to reports from China, Tesla is expected to increase Model Y prices by 5,000 CNY (almost $700) on April 1 (like in the U.S. and some other global markets). At the same time, the insurance subsidy (8,000 CNY or $1,100) and paint color cost reduction (10,000 CNY or almost $1,400) will expire.

For broader context, it’s worth noting that BYD—the largest EV maker in China—also noted a sales decline in February, and is actively refreshing its lineup and applying lower prices.