In yet another sign of weakening demand for Tesla’s (NASDAQ:TSLA) vehicles, the electric vehicle (EV) maker has cut its output in China. Because of this development, investors now expect the firm’s first-quarter deliveries to come in below average estimates. TSLA stock is down 2% as of this writing in response to the news.

According to a Bloomberg report, CEO Elon Musk’s automaker is now operating its Shanghai plant five days per week, down from 6.5 days previously. Beginning in March, this reduction could last through the end of April.

Tesla’s Market Share in China May be Dropping

EV demand in China is reportedly growing at a slower pace. However, BYD (OTCMKTS:BYDDY) — one of Tesla’s largest competitors in the country — recently reported that combined sales of plug-in hybrids and EVs now account for 48.2% of all auto sales in China

BYD CEO Wang Chuanfu believes that this “penetration could cross 50 percent in the next three months.” What’s more, the CEO says that if plug-in hybrids and EVs account for 45% of auto sales in China for 2024, deliveries will have jumped by 2 million units.

Still, Tesla’s decision to slow its production in Shanghai suggests that it is not benefiting from this growth. Consequently, Tesla’s market share in China appears to be dropping.

A Mixed Bag for Tesla in China So Far

In January and February, roughly 132,000 EVs rolled off of Tesla’s assembly lines in China, down from approximately 140,000 during the same period a year ago. However, Tesla’s EV sales in China also came in at roughly 70,000 units during the same period, compared with 61,000 a year ago.

Still, per Barron’s, the EV maker’s exports from China sank to 62,000 vehicles versus 79,000 units in the first two months of 2023.

On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.