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Shanghai factory upgrade slashed Tesla’s China sales last month

<i>Qilai Shen/Bloomberg/Getty Images</i><br/>The Tesla Inc. Gigafactory in Shanghai
Bloomberg via Getty Images
Qilai Shen/Bloomberg/Getty Images
The Tesla Inc. Gigafactory in Shanghai

By Laura He, CNN Business

Tesla’s sales of China-made vehicles plunged 64% in July from a month earlier, as the company’s ambitious upgrade of its Shanghai factory disrupted production.

The sharp drop for Tesla comes as sales of new energy vehicles in China more than doubled, as the world’s largest car market aggressively promotes switching to electric.

Tesla delivered 28,217 electric vehicles from its Shanghai factory last month, down from June’s 77,938 units, according to data released by the China Passenger Car Association on Tuesday. The sales figure was down 54% from the same period last year.

The US carmaker had just begun recovering from a months-long lockdown in Shanghai earlier this year that had hit its production and suppliers. In June, Tesla posted record sales of vehicles made in China.

The CPCA didn’t elaborate on the reasons behind Tesla’s July sales plunge, but the US carmaker said in its quarterly earnings call last month that its Shanghai factory had recently undergone some “equipment upgrades,” which were aimed at increasing the production rate.

Multiple media outlets have reported that Tesla suspended most production at its Shanghai plant in July to work on an upgrade, which could boost the plant’s output by as much as 22,000 cars per week — a 30% increase from its current capacity.

The upgrade was scheduled to complete by August 7, according to Bloomberg and Chinese media site 36kr. Tesla did not respond to a request for comment.

The Shanghai plant is already the world’s largest factory for Tesla by installed capacity, able to produce more than 750,000 vehicles per year, according to Tesla’s quarterly update last month. After the upgrade is completed, the plant would be able to churn out more than a million EVs a year, according to media reports.

“With each of the Fremont and Shanghai factories achieving their highest-ever production months and new factory growth, we are focused on a record-breaking second half of 2022,” Tesla said.

EV sales surge in China

While Tesla sales slumped in July, Chinese EV and battery maker BYD reclaimed the top spot, selling 80,991 pure electric vehicles, up 16% from June.

The country’s overall retail sales of new energy vehicles — including both electric vehicles and plug-in hybrids — increased 117% in July from the same period a year ago, thanks to government’s incentives, a recovery in supply chains, and rising EV demand because of higher oil prices, the CPCA said Tuesday.

China has aggressively pushed the development of EVs in recent years, giving out cash subsidies to automakers to encourage production.

The CPCA said on Tuesday that China’s new energy car sales for 2022 could reach 6 million units, up from its previous estimate of 5.5 million vehicles. The new number would represent a 70% increase from last year.

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