BYD price war forces Tesla to cut Model Y and Model 3 production

Faced with the cutthroat competition of local electric vehicle makers, Tesla is taking steps to reduce production in its largest Gigafactory in Shanghai.

Instead of a 7-day workweek, Tesla employees at Giga Shanghai are now being called in just five days, and Tesla's battery production there is facing even deeper production cuts.

Tesla makes the Model Y and the Model 3 Highland refresh at Giga Shanghai, but those compete against tens of models and versions from Chinese EV makers. The world's biggest electric car manufacturer BYD, for instance, started the new year with a massive price cut for refreshed models across its portfolio.

Its cheapest electric car, for instance, the BYD Seagull, now starts from under $10,000 in China. Such prices are raising the alarm in Washington, with Biden's administration investigating the threat from nearshoring Chinese EVs or parts in places like Mexico.

After the early adopters rush, however, the EV sales growth seems to be tapering, and the Chinese juggernauts which have invested in EV and battery production for a decade are facing oversupply issues. This has now led to huge pricing pressures at home, so Tesla has to deal with every major EV maker there cutting prices and introducing new models to spur up demand.

NIO, for instance, advised Model Y buyers to wait for its direct Onvo competitor whose production costs are 10% less than Tesla's, all the while it comes with 800V architecture, battery swaps, and other advantages over the Model Y.

In the video below, NIO's CEO showcases the interior space and build quality of its upcoming Model Y competitor that Tesla will have to face very soon.

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