- Tesla said that it would suspend production at its Fremont, California, factory beginning March 23.
- The company said that “continued operations” had caused challenges for employees and suppliers.
- The San Francisco Bay Area is under a shelter-in-place order among a worsening coronavirus outbreak in the US.
- In shutting down its plant, Tesla joins the Detroit Big 3 and much of the rest of the auto industry operating manufacturing facilities in the US.
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On Thursday, Tesla said that it would suspend production at its main factory in Fremont, California, beginning March 23.
“In the past few days, we have met with local, state and federal officials,” Tesla said in a statement.
“We have followed and are continuing to follow all legal directions and safety guidelines with respect to the operations of our facilities, and have honored the Federal Government’s direction to continue operating. Despite taking all known health precautions, continued operations in certain locations has caused challenges for our employees, their families and our suppliers.”
The San Francisco Bay Area is under a multi-county shelter-in-place directive, but Tesla had continued to operate.
Tesla said that it would maintain basic operations at the facility.
Suspending production in New York state, but staying open in Nevada
The carmaker added: “Our factory in New York will temporarily suspend production as well, except for those parts and supplies necessary for service, infrastructure and critical supply chains. Operations of our others facilities will continue, including Nevada and our service and Supercharging network.”
In its statement, Tesla noted that it was “implementing ‘touchless deliveries’ so customers can continue to take delivery of their vehicle in a seamless and safe way.”
Explaining the process, Tesla said that “due to the unique over-the-air connectivity of our vehicles, customers are able to unlock their new cars at a delivery parking lot via the Tesla App, sign any remaining relevant paperwork that has been placed in their car, and return that paperwork to an on-site drop-off location prior to leaving.”
Since Wednesday, General Motors, Ford, and Fiat Chrysler Automobiles has suspended production at the North American factories. They have been joined by Honda, Nissan, Toyota, Volkswagen, and Hyundai. Mercedes and BMW have kept their factories operating.
The ramifications for Tesla
Tesla produced over 100,000 vehicles at Fremont in the final quarter of 2019, so losing several weeks would likely mean anywhere from 30-40,000 units don’t roll off the assembly line. That’s not something that the company wants as it presses to to deliver more than 400,000 vehicles in 2020.
However, the electric automaker’s Shanghai factory is coming back online after a 10-week shutdown due to the coronavirus outbreak in China, so Tesla’s overall expectations for the year might not suffer a severe setback.
In its statement about the Fremont suspension of production, Tesla noted that it has about $8.5 billion in cash on hand, with access to another $3 billion in credit facilities. That’s enough to carry the company through about a year of operations, although the unique situation with the coronavirus outbreak could mean that Tesla’s balance sheet comes under stress sooner.
More pressing will be asking customers to wait for delivery of a vehicle, if Fremont remains on limited operations for far longer than expected (most automakers in the US are shutting down for two weeks, initially). The company has obviously sought to address that concern, but it doesn’t rack up inventory like the legacy carmakers, so it might test consumer patience.
Of course, Tesla customers have been patient in the past, and under the current state of emergency, they might not have a choice.