Tesla Halts Shanghai Factory Work as China Covid Curbs Hit

Electric vehicle giant Tesla is halting production at its Shanghai factory for two days, according to a notice sent internally and to suppliers, as China tightens its Covid restrictions to curb the country’s latest outbreak.

The Shanghai factory runs around the clock, and suppliers and Tesla staff were told on Wednesday that production would be suspended until Friday.

It did not give a reason for the stoppage at the plant, also known as the Gigafactory 3, which makes the Tesla Model 3 sedan and the Model Y crossover sport utility vehicle.

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Many cities across China, including Shanghai, have been rolling out strict movement controls to stem the country’s largest Covid-19 outbreak in two years. The measures have also caused factory shutdowns in other parts of the country, putting pressure on supply chains.

Tesla did not have immediate comment.

Its Shanghai factory produces cars for the China market and is also a crucial export hub to Germany and Japan. It delivered 56,515 vehicles in February, including 33,315 for export, according to the China Passenger Car Association.

That amounts to an average of around 2,018 vehicles a day.

Authorities in Shanghai have asked many residents not to leave their homes or work places for 48 hours to as long as 14 days as they conduct Covid tests or carry out contact tracing.

In a separate notice, Tesla asked suppliers to estimate how many workers were needed to achieve full production and to provide details of workers affected by Covid restrictions.

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

Any protracted China lockdowns will further rattle Asian supply chains, OCBC economist Wellian Wiranto said in a research note, noting the southern manufacturing hub of Shenzhen alone produces 11% of China’s exports.

Reuters with additional editing by Sean O’Meara

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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.