Tesla halts work at Shanghai factory for two days amid China COVID curbs

According to a notice sent internally and to suppliers, Tesla (TSLA.O) is suspending production at its Shanghai factory for two days as China tightens COVID restrictions to combat the country’s latest outbreak.

The Shanghai factory operates 24 hours a day, seven days a week, and suppliers and Tesla employees were informed on Wednesday in a notice obtained by Reuters that production would be halted on Wednesday and Thursday. It did not specify why the plant, also known as the Gigafactory 3, which produces the Tesla Model 3 sedan and the Model Y crossover sport utility vehicle, was shut down.

Many cities in China, including Shanghai, have implemented strict movement controls in order to contain the country’s largest COVID-19 outbreak in two years. The measures have also resulted in factory closures in some areas of the country, putting strain on supply chains.

Tesla did not respond immediately. Its Shanghai factory manufactures vehicles for the Chinese market while also serving as an important export hub to Germany and Japan. According to the China Passenger Car Association, it delivered 56,515 vehicles in February, including 33,315 for export.

This equates to approximately 2,018 vehicles per day on average. It was unclear whether the work stoppage would extend to other plant operations over the two days.

According to two people briefed on the notice, it applied to Tesla’s general assembly lines. They did not want to be identified because the information was not made public.

The notice did not specify whether the measures would result in a loss of output or whether Tesla would be able to compensate for any lost output. Many residents in Shanghai have been asked not to leave their homes or workplaces for 48 hours to 14 days while authorities conduct COVID tests or contact tracing.

In a separate notice issued on Wednesday and obtained by Reuters, Tesla requested that suppliers estimate the number of workers required to achieve full production and provide information on workers affected by COVID restrictions.

It also asked suppliers to prepare workers to live, sleep, and eat at the factories, similar to China’s “closed-loop management” system. Foxconn, an Apple supplier, was allowed to resume some operations at its Shenzhen campus on Wednesday after reaching an agreement.

According to a person familiar with the situation, Tesla was notified last weekend by one of its suppliers that COVID measures had impacted its production. According to the person, Tesla’s supplier told them that their stockpiles could only last two days.