Editor's note: The Reuters article reporting that two people in the know had claimed that Tesla would likely cut production of its Model Y mass-market SUV by more than 20% in December has been updated to note that in response to Reuters' request for comment a "Tesla representative replied 'false news,' without elaborating."

What happened 

Tesla (TSLA 1.35%) shares were falling lower today after Bloomberg reported that the company could cut production of its Model Y at its Shanghai factory this month. 

The EV stock was down by 4.5% at 10:50 a.m. ET. 

So what 

Tesla could cut Model Y production at its Shanghai factory by 20% this month, compared to November's production levels.

Tesla hasn't confirmed the production cut, nor is it immediately clear why the automaker may put it in place, but Bloomberg and Reuters reports indicate that Tesla's inventory levels are high right now in China.

Tesla recently began offering some insurance incentives in China to help lure new customers, and the company also cut the price of its Model Y and Model 3 in the country by up to 9%. 

The news sent Tesla's shares sliding today, as investors are worried that potentially slowing EV demand and rising competition in China could hurt the company. 

Additionally, China's economy has been slowing down, and investors are concerned that slowing growth could cause more buyers to put off automotive purchases. 

Now what 

Tesla has invested heavily in ramping up production at many of its factories, including by upgrading its Shanghai facility last summer. 

That investment helped boost Tesla's production in China recently, but investors should keep an eye on whether the company can continue at the same pace.

While a temporary slowdown in December isn't good news, it's worth pointing out that Tesla is still a top EV producer and can weather any potential slowdown in demand better than smaller EV start-ups.