Tesla Extends Shanghai Plant Shutdown Again as Outbreak Persists

(Bloomberg) -- Tesla Inc. extended the suspension of production at its Shanghai factory by at least a day, according to people familiar with the matter, amid uncertainty over the city's pandemic lockdown and ongoing Covid-19 outbreak.

The suspension at the automaker's Gigafactory, which started Monday when the financial hub went into a phased lockdown, will run through at least Friday, said the people, who asked not to be identified because they're not authorized to speak publicly. Previously, workers were told production would likely resume on Friday, when the first phase of the lockdown was supposed to end.

Shanghai locked down the east of the city for four days on Monday to conduct mass testing to combat a Covid outbreak that's turned it into China's biggest virus hotspot. The western part of the city was due to be locked down from Friday, but authorities said late Wednesday they will adopt “static management” of the city, a phrase used by Chinese officials in other parts of the country to mean a strict lockdown in which residents are barred from leaving their homes.

Tesla told all employees to stay home and abide by community orders, except for workers on emergency duty, the people said. The decision is “in accordance to the latest Covid prevention requirements of the Shanghai government” according to a company memo seen by Bloomberg News. It earlier also surveyed staff on their willingness to stay in the factory to allow so-called closed-loop production -- where workers are effectively kept in a bubble and tested frequently -- if it was able to resume operations Friday, the people said.

The first Gigafactory outside Tesla's home country produced half of the electric carmaker's vehicles last year and had to suspend production for two days earlier this month. The company said at the time that it was making its “best effort” to ensure production could continue at the plant, while “actively cooperating with the government's order for Covid tests and relevant pandemic prevention measures.”

The Shanghai factory is crucial for Tesla, considering China is the company's second-largest market and the plant builds cars for export to Europe and elsewhere in Asia. The China Passenger Car Association earlier this month reported that Tesla delivered 56,515 cars from the factory in February alone -- 23,200 for the domestic market and 33,315 for export.

Elon Musk, Tesla's chief executive officer, famously resisted California health regulators' efforts to keep a U.S. factory closed during the early days of the pandemic. After about seven weeks of shutdown, he reopened the Fremont plant -- his only U.S. vehicle-production site at the time -- on May 11, 2020, flouting county officials' orders and daring authorities to arrest him.

Musk ultimately cited the dispute as one of the reasons he moved Tesla's headquarters from Palo Alto, California, to Austin, Texas, in late 2021.

Tesla now has plants on three continents: in North America, the original factory in California; in Shanghai; and in Europe, where Musk last week handed over the first made-in-Germany Model Y vehicles at his new factory outside Berlin. In a few weeks, Tesla will celebrate the opening of a fourth auto factory, in Austin.

With assistance from Bloomberg