Tesla Could Reopen Its Shanghai Factory Next Week: Report

Text size

Tesla

might be reopening its most productive facility earlier than investors expected after it was shut down due to a Covid-19 outbreak in Shanghai.

There is a catch though.

The electric vehicle leader is set to reopen its Shanghai facility next week, according to a report from Bloomberg. Tesla (ticker: TSLA) didn’t immediately respond to a request for comment on the reopening.

The plant closed in late March due to rising cases in Shanghai. The South China Morning Post reports that Shanghai has recorded more than 300,000 infections since the start of March. City officials initiated an eight-day lockdown on March 28 and that lockdown became indefinite on April 5.

If the plant reopens, it would use a closed-loop system. That means employees essentially agree to live on site and be regularly tested for Covid-19. That’s not unheard of. Reuters reported earlier this week that EV battery maker

Contemporary Amperex Technology Co.

(300750.Shanghai), better known as CATL, enacted a similar system in one of its facilities.

The Shanghai plant is an important one for Tesla. It can produce more than 3,000 vehicles a day under optimal conditions, according to Wall Street estimates, and every day the plant remains closed puts pressure on deliveries. At the start of April, Wall Street expected the company to deliver roughly 350,000 vehicles in the second quarter, up from about 310,000 delivered in the first quarter of 2022. Now estimates are closer to 330,000.

Tesla also has new plants ramping up production in Germany and Austin, Texas.

It isn’t clear whether investors are punishing the stock for the production shutdown. Tesla shares are down about 9% for the month of April. The

S&P 500
is down 3% and the

Nasdaq Composite
is off about 6%.

Tesla stock is more volatile than the overall market. That’s one factor in the bigger decline.

Tesla investors have also had to weigh the impact of CEO Elon Musk’s bid for

Twitter

(TWTR). That raises the possibility of distraction for Musk during an important time for Tesla and there is more EV competition to contend with these days.

Ford Motor

(F), for instance, will start delivering its all-electric F-150 to customers in April.

Write to Al Root at [email protected]