Tesla Plunges 5% As Even More Shanghai Shutdowns Are Now On The Horizon

Update (0930ET): Tesla China has denied the Reuters report, saying in an interview with a reporter from the Global Times on the 25th:

“The Shanghai plant will still maintain efficient production and excellent output in 2022. Vehicle production will be carried out as planned for the annual production line maintenance next week (that is, this week).”

At the same time, after a year of hard work, the workers also took a break during the maintenance period of the production line. The charging piles and other workshops have not stopped, and the media’s statement that the factory has stopped production is not entirely accurate.”

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Tesla shares are lower in the pre-market session by about 5% on Tuesday morning while the rest of the market looks set to rally on China’s re-opening news. Despite China’s re-opening, the only news to break this morning about Tesla has been a schedule of even more shutdowns for its key plant in China. 

And Tesla’s terrible end to 2022 continues…

Tesla already has its Shanghai plant running at a reduced rate, as we noted over the weekend. The company is running for one less day than expected this month – when it was expected to shut down Shanghai to begin with in order to shuffle production plans and allow demand the catch backup with supply. The current shut down is a “planned” stoppage.

Shanghai is a key plant for the auto manufacturer, producing not only vehicles that are sold in China, but also many that are exported throughout Europe. The EV maker was expected to halt production – as we also noted in a previous article back on December 9th – but continued swirling questions about demand are once again surfacing after the company shut down operations at the key location earlier than expected this month.

Now, Tesla is also announcing a stoppage for the Chinese New Year, between January 20th and January 31st, a new report from Bloomberg, citing internal plans viewed by Reuters, says this morning. This means the plant will only run for 17 days throughout the course of January.

The plan is to restart production on January 3rd and run through January 19th. 

As we noted over the weekend, as part of the current shut down, Model Y and Model 3 production lines are expected to be suspended. Bloomberg reported earlier this month that Model 3 production could resume in early January, though Model Y output disruptions could be prolonged.

We noted this weekend that sources said Model 3 production could be suspended for the Chinese New Year. They added that this would allow for more upgrades and equipment maintenance to produce an enhanced version of the model. This now obviously looks like the road Tesla is taking.

Reuters also reported on the planned shut down earlier this month, citing two people who said that the suspension of the assembly line would result in a 30% reduction in Model Y production for the month. They added this type of production halt wasn’t a common practice for the plant. 

“The Shanghai factory, the most important manufacturing hub for Elon Musk’s electric vehicle company, kept normal operations during the last week of December last year,” Reuters said earlier this month.

For December – and now for January – that doesn’t look like it’ll be the case. Earlier this month, Bloomberg also said that slumping Chinese demand would result in the factory reducing production by 20% from full capacity.

Reuters reported last month that Tesla plans a revamped version of Model 3 to cut production costs and boost the style of the five-year-old electric sedan. Tesla has also cut prices in the second-largest economy in the world to stay competitive with domestic bands. 

Tesla shares year-to-date are now down about 65% and, with this morning’s slide, heading lower, it would appear…

…but the question many seem not to be asking is what happens in February/March when everyone has herd immunity and the economy re-opens, unleashing two years of unprecedentedly pent-up demand?