Shanghai Starts Lifting Lockdown: What Is Tesla Going To Do With Its Employees?

Zinger Key Points
  • Tesla plans to keep its employees in a factory bubble until mid-June.
  • The decision was precipitated by the company's failure to convince local authorities of alternative options.
  • Shanghai has begun easing lockdown restriction with residents allowed to venture out for a few hours.

Shanghai is emerging out of a six-week lockdown, although the easing of restrictions is being implemented gradually. Tesla Inc TSLA has planned to take a measured approach with respect to Giga Shanghai reopening, according to a report.

What Happened: Tesla is planning to maintain its factory operations in China under a closed-loop system at least until mid-June, Bloomberg reported, citing people familiar with the matter.

The company has been keeping its Giga Shanghai employees in a factory bubble ever since the unit reopened on April 18 following a nearly three-week-long shutdown necessitated by local authorities amid the COVID-19 resurgence.

Under the closed-loop system, workers were ferried to the manufacturing plant and made to live and work within the premises, with regular COVID checks.

The company continues to run a one-shift production schedule since the restart, rendering the daily production rate at 1,200 units.

A Reuters report from earlier this week suggested that the company plans to revert to the two-shift schedule that could increase production to 2,600 units per day from May 23.

The decision to defer full ramp has also to do with component shortages. Bloomberg noted that Tesla plans to resume operating around the clock once the supply of auto parts and components becomes more consistent.

Tesla has reportedly spoken to Shanghai authorities regarding accommodating its factory workers in temporary dorms or vacant COVID-19 isolation centers. The company was also hoping to have its workers commuting from their homes on door-to-door shuttles daily, the report said. The idea was turned down, as community-level officials hinted that once people left their apartments they wouldn't be let back in, it added.

Related Link: Tesla A 'Cornerstone Holding' — But Usually-Bullish Analyst Cuts Price Target Again Anyway

Restricted Lifting In Restrictions: Despite the official word about the lifting of COVID-19 restrictions in Shanghai, home to 25 million people, things are progressing only at a slow pace, a Nikkei report suggested.

Local authorities have allowed only some residents to leave their homes and only for a few hours, Nikkei said, citing one of its local reporters. The decision to ease restrictions was based on data that showed a drop in daily infections below 1,000 this week, the report said.

Related Link: Tesla Analyst Contradicts Elon Musk On China Lockdown Impact: 'Giga Shanghai Ramp-Up Unlikely Until June'

Why It's Important: Tesla's lone factory in China, Giga Shanghai, is considered a vital cog for the company. The factory produced roughly close to 500,000 units in 2021 and more importantly, Giga Shanghai-made cars carry higher margins.

Hurt by the factory shutdown, Tesla's China sales and production plummeted in April.

Prominent Tesla bull and Wedbush analyst Daniel Ives on Thursday lowered his price target for Tesla stock from $1,400 to $1,100. The analyst based his tempered expectations on the "choppy restarting" of the Giga Shanghai plant.

TSLA Price Action: Tesla stock was down 2.65% to $690.62, according to Benzinga Pro data.

Photo by Hyunwon Jang on Unsplash

Posted In: ChinaCovid-19electric vehiclesEVsGiga ShanghaiNewsGlobalTechMedia