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Tesla Halts Production at Shanghai Gigafactory

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Tesla has reported halting vehicle production at their Chinese factory in Shanghai during the five-day Labour Day break. Workers were to return on Wednesday, 06 May 2020 but were told to extend their holiday until 09 May 2020. The factory usually operates six days per week, which makes this shutdown an unusual action. Tesla did not comment on their decision to extend their cease in production at the Shanghai facility. However, recent reports suggest that they may be experiencing delays in receiving Model 3 parts, as well as repairs in its crucial manufacturing equipment. The production facility is not entirely vacant and has some employees on the premises carrying out repairs, maintenance and general facility inspections.  More notably, this is not the first time the factory has been shut.

More recently, the plant was closed for two weeks due to government closure orders for health reasons. Yet, with assistance from local government, the factory was permitted to reopen swiftly. The Shanghai Tesla Gigafactory is reported to be capable of producing 3,000 Model 3s per week with their Q1 results claiming that they plan to increase this to 4,000 weekly. These production levels are unlikely to occur given the current climate although works are happening to almost double the Gigafactory as production for Model Ys will commence as soon as next year.

This halt in automobile production in China is mirrored worldwide, which makes every single Tesla factory currently non-operational. Work stoppages are concerning Tesla’s executives regarding their financial performance. Yet, its share price continues to remain strong and above pre-COVID-19 levels. Global shutdowns have disrupted supply chains across all industries, with Tesla being no exception as it only sources 30% of its parts locally. More broadly speaking, the U.S. based company remains to hold the largest market share in the electric car industry and accounted for 60% of electric car sales in the U.S. 

The combination of a slowing global economy and the COVID-19 pandemic has seen more than a 20 per cent reduction in year on year (YOY) global automobile sales. In terms of statistics, 59.5 million vehicles are projected to be sold globally in 2020, while in 2019, there were 75 million car sales. The U.K. has been particularly hard hit with new car sales in April 2020 dropping 97.3% to 4,321 sales- the lowest monthly record since February 1946. Tesla was the top purchased vehicle in this market selling 658 Model 3s- significantly higher than the 367 Jaguar I-Pace models that recorded the second highest sales volume. 

By Caroline Wong 

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