Tesla, Inc. TSLA is reportedly suspending production at its key Giga Shanghai plant in China.
What Happened: Production at the Giga Shanghai plant has been suspended on Saturday, ahead of the previously planned timing of the last week of December, Reuters reported, citing an internal notice and people familiar with the matter.
Tesla’s China unit has canceled the morning shift and has asked all workers to start their break with immediate effect, the report added. A previous Reuters report suggested a shutdown was planned from Dec. 25 to Jan. 1.
China has experienced a renewed outbreak of COVID-19 since the government lifted its zero-tolerance measure earlier this month, buckling to pressure from the public and companies. The BF.7 variant of the coronavirus is currently driving the surge in China, with Qingdao, a city in the eastern province of Shandong reporting about half a million infections each day, the South China Morning Post reported.
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Why It’s Important: The Giga Shanghai is Tesla’s most productive factory currently. In 2021, the facility produced about half a million cars. China-made cars also carry a higher margin due to lower labor costs involved in the country.
Tesla’s newest factories in Berlin and Texas are ramping up slowly and steadily but they may not be yet ready to pick up any slack left by their China counterpart.
On another note, the evolving situation in China does not bode well for demand. The multiple downward price adjustments announced by Tesla in China since late October are construed as actions to push its vehicles in an environment of slowing demand.
Tesla closed Friday’s session down 1.76% at $123.15, according to Benzinga Pro data.
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