Tesla will halt production at its China factory in part as a result of declining demand.

According to persons familiar with the situation, Tesla Inc. will progressively halt production at its Shanghai electric car facility from the end of the month until as early as January due to modifications to the manufacturing lines and waning consumer demand.

The majority of employees on the Model Y and Model 3 manufacturing lines won’t be needed in the final week of December, according to the people, who asked to remain anonymous because they weren’t permitted to speak in public. Disruptions to Model Y output could last until early January, one of the persons said.

Tesla production

Another insider stated that production of the Model 3 sedan may once more be halted around Chinese New Year, which will fall in late January in 2023, to allow for more equipment improvements and maintenance in preparation for the model’s redesigned iteration.

Tesla representatives in China didn’t immediately reply to a request for comment. According to persons it didn’t identify, Reuters earlier on Friday reported that Model Y assembly would be halted between December 25 and January 1.

China’s continued stringent stance on Covid, which has led to sudden lockdowns and kept customers away from dealerships, has hampered consumer demand for automobiles.

According to figures from the Passenger Car Association issued on Thursday, retail sales of all passenger vehicles nationwide fell in November, falling by roughly 11% from October.

Other people familiar with the issue earlier this week reported that Tesla is shortening production shifts at the facility as soon as Monday and has delayed the on-boarding of some new hires, adding to indications that demand for the company’s electric cars in China isn’t meeting expectations.

One of the individuals claimed that a Tesla recruiter advised them to be ready to start after the Chinese New Year holiday because there isn’t an immediate need for more workers right now.

Some production staff who were scheduled to start in November, including in Tesla’s battery workshops and on vehicle assembly lines, were informed by the company that their start dates would be delayed.