Tesla Pauses Production in Shanghai

Tesla Inc. is briefly suspending production at its Shanghai factory for two days, starting today, as China upgrades restrictions pertaining to a new COVID outbreak. While the rest of the world has been scaling back pandemic-related restrictions, the Chinese Communist Party has begun issuing new mandates after locking down 51 million people at the start of the week. The government has said its part of its no-tolerance approach to the virus after citing roughly 1,700 infections spread across a dozen cities.

This has already started impacting supply chains that have been beleaguered by two years of restrictions already, apparently catching Tesla in the process. Despite Shanghai not having been issued any official orders, there’s been mounting pressure for businesses to temporarily shut down or reinstate protocols to have people work from home. 

According to Reuters, Tesla only plans on having its facility idled until Friday. The outlet cited a notice from the factory, in addition to several unnamed sources asking not to be identified because they’re not authorized to speak publicly. But the general claims can be backed up by Chinese media confirming lockdowns in the northeastern province of Jilin, as well as in the cities of Shenzhen and Dongguan. Local authorities in other municipalities have opted to begin suspending transportation services and imposing travel restrictions, which Reuters‘ secret sources said made it impossible for many workers to commute to the factory.

Tesla’s Shanghai factory operates 24/7 and produces cars for the Chinese market. It also serves as an export point for vehicles heading to Germany and Japan. It delivered 56,515 vehicles in February, including 33,315 for export, according to the China Passenger Car Association. That works out to roughly 2,018 vehicles a day.

From Reuters:

Two people briefed on the notice said they understood it applied to Tesla’s general assembly lines. They declined to be identified because the information was not public.

The notice did not specify whether the measures would correspond to a loss of production, or whether Tesla could make up for any lost output.

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 issued on Wednesday that was also seen by Reuters, 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.

Suppliers have reportedly already told the automaker that they’re only covered for about two days of downtime. Of course, plenty more manufacturers will be impacted if China’s latest round of lockdowns persists for longer than that. We’ve already seen numerous Japanese facilities having to ease off production to account for hiccups in Asian supply chains ahead of the new restrictions, with Toyota being the most recent. The situation clearly needs to be managed better. But the remedy shouldn’t come down to people having to live on the factory floor. If the principles Musk touts publicly are valid, he needs to prevent such labor abuses.

[Image: B.Zhou/Shuterstock]

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