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Tesla is reportedly reducing its production volumes in its Shanghai Gigafactory according to documents seen by Reuters as companies within China struggle to navigate a surge in the number of COVID-19 cases after the government lifted several restrictions.

According to the internal memo, production will resume on 3 January and will go on for 17 days until 19 January. After that, the company plans to pause its manufacturing activities for 12 days, from 20 January until the 31st of the month.

This break coincides with the Chinese new year, which will be celebrated on 22 January 2023. These are not accustomed breaks for Tesla and it is still unclear why the company is adopting such a schedule.

The report comes days after sources told Reuters journalists that Tesla would also be pausing most activities within its Shanghai facility during the last week of December. No reason was provided either at that time for the unexpected break.

COVID Gets out of Control in China After Lifting Zero-COVID Restrictions

China has been easing the restrictions imposed as part of its zero-COVID policy such as no longer requiring travelers to quarantine after they arrive. This restriction will be fully lifted on 8 January.

The availability of flights coming in and out of China has been affected by the government’s COVID-related restrictions. This has made it difficult for companies to bring in technicians, executives, and key personnel needed to keep their operations up and running.

However, easing restrictions has had its consequences for Chinese provinces as the number of hospitalized patients needing urgent care has skyrocketed lately and some locations are struggling to serve their population.

“In provinces currently experiencing high demand for intensive care, they are nearing the critical threshold of available ICU beds and resources, commented Jiao Yahui, Director of the Medical Affairs Department at China’s National Health Commission.

Companies with operations within the country, including Tesla (TSLA), has been struggling to keep things running as workers are getting sick and finding a replacement, especially for highly specialized jobs, is not an easy task.

During the third quarter of 2022, Tesla produced 19,935 units of Model S/X and 345,988 units of Model 3/Y. The company’s Shanghai Gigafactory may have produced over 700,000 electric cars so far this year, meaning that it accounts for at least half of the firm’s total yearly output.

Tracking COVID in China Remains a Challenge

The decision to take a pause is not necessarily catastrophic for Tesla but it does highlight the challenges that the company is still facing to stay on course in the Asian country. Meanwhile, the government may be forced to reintroduce the restrictions it has lifted if the number of COVID cases continue to climb as fast as they have lately.

Data about COVID in China is considered unreliable amid the government’s lack of transparent reporting. Some sources such as Worldometers indicate that the number of daily cases has been increasing again after they briefly dropped in mid-December with 2,983 new cases being reported on 25 December.

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Meanwhile, data from the World Health Organization shows that there were 28,493 new cases reported in the past 24 hours while the New York Times COVID tracker showed that zero new cases were reported on 25 December.

On this same date, the National Health Commission (NHC) indicated that it will stop publishing cases and deaths statistics related to COVID-19 at a point when infections appear to be on the rise again.

The institution has been sharing this data since early 2020. The timing of this decision coincides with China’s decision to ease its zero-COVID policies and restrictions. The impact of this decision is considered limited as data coming out of the NHC has largely been considered either fake or inaccurate.

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