Tesla Giga Shanghai upgraded again for the production of the new Model 3

Some production lines at Tesla's Giga Shanghai will be shut down until the end of February, according to people familiar with the matter. During that time, the company will upgrade the plant to launch an improved version of the Model 3 in the more competitive Chinese market.

Production of cars at Tesla's Shanghai plant is divided into two phases, with some workers in the first phase no longer allowed on the line starting as early as Sunday, people familiar with the matter said.

In fact, Tesla has been upgrading its production lines in phases over the past two months and expects to start delivering the new Model 3 later this year, although the company has not yet confirmed that publicly.

Tesla's Shanghai plant currently produces the Model 3 and Model Y. The upgrade comes at a time when Tesla is expanding its global production capacity.

The upgrade comes at a time when Tesla is facing increasing competition in the world's largest electric car market (China.) Model 3 sales in China have been consistently declining, with sales of about 125,000 units in 2022, down 17 percent from the previous year. As Chinese rivals such as and BYD continue to introduce new models, Tesla has had to cut prices to boost sales.

Nonetheless, orders for Chinese Teslas have begun to level off since earlier this month after the initial frenzy sparked by the price cuts, people familiar with the matter said.

Tesla produced 1.37 million electric cars worldwide last year, with more than half of them made at its Shanghai plant. After several upgrades, the Shanghai plant has reached an annual capacity of about 1 million vehicles, more than twice the initial plan (450,000). A Tesla representative did not immediately respond to a request for comment.

According to the China Passenger Car Association (CPCA), total new energy passenger vehicle shipments from Chinese dealers nearly doubled to 6.5 million units in 2022. The agency expects that number to grow 30 percent this year. Automakers including NIO, XPeng and BYD are launching new electric models to compete for market share.

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John Murphy

John Murphy is the founder of TOPCARS Tesla Aftermarket Accessories, as well as an investor in Tesla and owner of the Model Y. He posts about Tesla news while running the site on a daily basis.

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