Tesla Halts Model Y and Cybertruck Production

Tesla has instructed workers on Model Y and Cybertruck production lines at its Austin factory to stay home for the entire week of Memorial Day, signaling mounting concerns over faltering demand and growing inventory. The unprecedented production pause comes amid a 13% year-over-year drop in deliveries and follows months of increasingly irregular work schedules for hourly employees.

Three Tesla workers confirmed to Business Insider that the extended break is unusual, noting that production lines remained operational during the same period last year. The development marks the latest in a series of production adjustments as the electric vehicle maker grapples with slowing sales and growing inventory challenges.

Workers Face Uncertain Schedules

Hourly workers at the Austin Gigafactory were notified earlier this week that they could either take paid time off or come in for cleaning and training but would not be operating production lines during the Memorial Day week. This represents a significant departure from Tesla’s typically aggressive production targets and relentless work pace.

“Workers said their schedules have been increasingly inconsistent since February. Some said they had been sent home early on multiple occasions,” according to Benzinga. The Austin factory also began restricting overtime hours in February, further suggesting cost-cutting measures are underway.

This extended production pause follows earlier reports that Tesla had reduced Cybertruck production targets and reassigned some workers from that line. In December, the company also briefly halted Cybertruck production for three days, indicating ongoing challenges with the vehicle’s manufacturing ramp-up.

Growing Inventory Concerns

Tesla’s first-quarter results revealed troubling signs about the company’s inventory situation. During that period, Tesla produced nearly 26,000 more vehicles than it delivered, despite already having reduced production by approximately 100,000 units compared to the previous quarter.

The Cybertruck, Tesla’s highly anticipated electric pickup, has faced particular challenges. According to a voluntary recall notice filed in March, Tesla had delivered fewer than 50,000 Cybertrucks since production began. Some industry reports suggest over 10,000 units remain unsold, contributing to the company’s inventory buildup.

To stimulate demand, Tesla has introduced discounts on the refreshed Model Y launched in January and recently released a cheaper variant. However, these price adjustments have yet to reverse the company’s sales decline effectively.

Workforce Reductions Affecting Suppliers

The production pause is having ripple effects throughout Tesla’s supply chain. Earlier this month, Trigo, a company that contracts workers for the Austin factory, laid off 50 employees according to a Worker Adjustment and Retraining Notification (WARN) issued by the Texas Workforce Commission.

These workforce reductions come at a challenging time for Tesla, with the company’s stock down approximately 26% year-to-date, significantly underperforming the broader market. The sustained decline reflects investor concerns about Tesla’s growth trajectory and competitive positioning in an increasingly crowded electric vehicle market.

Industry analysts note that Tesla’s production pauses contradict CEO Elon Musk’s March statement during an event with President Donald Trump, where he claimed the company would double its vehicle production rates in the U.S. over the next two years.

Shifting EV Market Dynamics

Tesla’s production challenges reflect broader shifts in the electric vehicle market. After years of explosive growth, EV adoption rates have begun to plateau in some markets as consumers face higher interest rates and reduced government incentives.

Competition has also intensified, with traditional automakers and new entrants alike introducing compelling electric models across various segments. This competitive pressure has eroded Tesla’s once-dominant market share and forced price reductions across its lineup.

Despite these challenges, Tesla maintains significant advantages in battery technology, charging infrastructure, and brand recognition. Whether these strengths will be sufficient to overcome current market headwinds remains to be seen as the company navigates this period of adjustment.