It's not an established practice to shut down operations for an extended period of time during the Chinese New Year.

(Screenshot from Tesla China video.)

Tesla (NASDAQ: TSLA) said most employees at its Shanghai plant will take a vacation break at the end of next month, essentially acknowledging a report yesterday that the output reduction would extend into January.

The US electric vehicle maker will run 17 days of production from January 3 to January 19 and will stop production of electric vehicles from January 20 to January 31 to allow for an extended break during the Chinese New Year, Reuters reported yesterday, citing an internal schedule.

Tesla did not specify the reason for the production slowdown in its output plan, but it is not an established practice to stop production for an extended period during the Chinese New Year, the report noted.

Local media outlet Caijing today quoted a Tesla China source as saying that the information about Tesla's holidays was not accurate.

"In fact, most employees at Giga Shanghai will be on vacation from January 20-28, which will be two days longer than the legal holiday, giving everyone the flexibility to schedule their return home," the source said.

Some employees have spent the holiday in Shanghai for the past two years, and they have not returned to their hometowns to enjoy the holiday for several years, according to the person.

"At the same time, some workshops still need to continue to operate at high speed during this period, and we have made preparations for the relevant arrangements," the person said.

China's next major holiday is the Chinese New Year, which falls from January 21 to 27. The holiday will see the world's largest migration of people before Covid broke out, as many people will return home to reunite with loved ones.

For the past three years, most Chinese have chosen to spend the holiday in the city where they work due to strict Covid control measures.

For industrial producers, especially car companies, when demand is strong, they encourage workers to work overtime on the holiday by offering high incentives.

Tesla's Shanghai plant began operations at the end of 2019, and there have never before been reports of the plant shutting down for any holiday.

Tesla's latest plan means it now apparently no longer needs to work overtime for production as it did previously, at a time when demand is under pressure.

In a report last week, Reuters cited an internal notice and two people familiar with the matter as saying that Tesla suspended production at its Shanghai plant on December 24, bringing forward its previous plan to suspend most work at the facility in the last week of December.

Global Times later cited a Tesla China source as saying that the vehicle production line at Tesla's Shanghai plant will undergo annual maintenance work this week as planned, but that other workshops, including charging pile production, were not shut down, so media report of production suspension was not entirely accurate.

The Reuters report today cited a research note released on Tuesday by brokerage firm China Merchants Bank International (CMBI) that said Tesla recorded 36,533 retail sales in China from December 1 to December 25, with average daily retail sales down 28 percent from the same period last year.

Sales in the Chinese auto industry were up nearly 15 percent over the same period, while BYD's average daily sales were up 93 percent, according to CMBI.

In the fourth week of December from December 19 to 25, Tesla vehicles had 8,915 insurance registrations in China, according to figures shared by auto blogger Zhu Yulong on Weibo yesterday.

Tesla had 11,670, 12,977 and 10,254 vehicles in the first three weeks of December.