Tesla to postpone hiring, shorten shifts at Shanghai plant

After enjoying a dream start in China, Elon Musk’s EV pioneer is now facing tougher competition from local EV makers in the word’s biggest auto market. Recent price cuts and incentive offers signaled demand isn’t keeping up with increased supply after an upgrade of the factory boosted capacity to around 1 million vehicles a year. On Wednesday, Tesla offered 6,000 yuan ($860) subsidies to customers who buy and take delivery of new cars this month, suggesting it has stock to clear.

China is key for Tesla, and continued growth in the world’s biggest EV market is crucial for achieving Musk’s goal of 50 percent annual growth globally for years to come.

The pullback in Shanghai comes as Tom Zhu, the longtime Tesla executive who oversaw construction of what was the U.S. company’s first overseas gigafactory, is deployed at the newest plant in Austin, Texas, Bloomberg reported earlier on Thursday. Zhu, who has been heading Tesla’s Asia Pacific operations, is said to be overseeing the ramp up of Giga Texas.

The shorter shifts at the Shanghai factory, as part of the output cut, won’t necessarily be immediately reflected in monthly deliveries because the company still has some inventory on hand, one of the people said. Any Model 3 or Model Y ordered in China today should be delivered within the month, Tesla’s website shows. That lead time is down from as long as four weeks in October and up to 22 weeks earlier this year.

Tesla may need to cut prices in China further in the coming year because it “increasingly appears to have a demand issue,” Sanford C Bernstein & Co. analyst Toni Sacconaghi Jr. said in a note this week.

Tesla shares fell almost 11 percent over the past three days since Bloomberg News reported the Shanghai production cuts. Musk’s bankers are considering providing the billionaire with new margin loans backed by Tesla stock to replace some of the high-interest debt he layered on Twitter Inc., according to people with knowledge of the matter.