Tesla halts production in the U.S. vehicle factory amidst COVID-19 crisis

On Thursday, Tesla Inc stated that it is going to suspend production at its San Francisco Bay Area vehicle factory on March 24, terminating a deadlock with California authorities tensed regarding the spread of the coronavirus.

Suspension in Operations

The company also said that it’s New York solar roof tile factory also will temporarily halt production, while work at its Nevada battery plant is going to continue.

“Despite taking all known health precautions, continued operations in certain locations have caused challenges for our employees, their families, and our suppliers,” the company said in a statement.

Shares of Tesla went down by 8% in the after-hours trading following the declaration. The decision to halt production at the Fremont, California, plant has surfaced at the time when Tesla was ramping up production of its Model Y sport utility vehicle at the factory. It is expected that the demand for the Model Y will be higher than for all of the other models of Tesla combined, according to Chief Executive, Elon Musk.

On Thursday, Musk tweeted that China operations of Tesla were running “normally across hundreds of suppliers & all of Tesla Shanghai.” The Shanghai factory worth $2 billion, which began delivering Model 3 sedans in December, is crucial for Tesla’s growth strategy and the company plans to amplify production capacity there.

Steering through Uncertain Period

According to Reuter’s report, a Tesla representative who is Shanghai-based said that the Chinese factory’s production rate has surpassed pre-coronavirus levels and over 91% of workers have started working since March 6. Tesla is planning to start making Model Y SUVs in Shanghai from 2021 and widen car parts manufacturing capacity, as per a government document.

Cui Dongshu, secretary-general at the China Passenger Car Association (CPCA) pointed out that Tesla was able to sell around 3,900 vehicles in February, more than the sale of 2,620 vehicles in January.

Tesla’s decision to halt production at its San Francisco area plant is a result of several days of talks with local officials and after the company met on Thursday with the city of Fremont.

On Thursday, California’s governor issued a statewide “stay at home” order to residents, urging them to leave their homes only when very crucial during the coronavirus pandemic.

The quickly spreading respiratory illness has infected over 10,700 in the United States.

The automaker also claimed that it believed it had required liquidity to successfully steer through the extended period of uncertainty, with about $6.3 billion in cash at the end of the third quarter, ahead of a recent $2.3 billion capital raise.

The city and officials from the surrounding Alameda County did not immediately answer a request for comment on Thursday.

Alameda County is one of six counties under an order from regional officials to “shelter in place,” which restricts activity, travel, and business functions to only the most important, and urges people to stay home except for the most necessary reasons.

On Tuesday afternoon, the county sheriff’s office said Tesla was not enlisted in the list of essential business and cannot continue to operate its factory normally. Tesla said on Thursday it would continue basic operations at the Fremont factory in accordance with the order to support vehicle and energy services and charging infrastructure.

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