COVID-19 Spreads Again In Several Cities In China Lockdown Again, Tesla Forced To Close Factory For Two Days

JAKARTA - The US electric vehicle manufacturer, Tesla, was forced to suspend production from its factory in Shanghai for two days. According to announcements sent internally and to suppliers, this was forced to do as the Chinese government tightened its COVID-19 restrictions again to curb the country's latest re-emergence of the outbreak.

The Shanghai plant operates around the clock, and Tesla suppliers and staff were notified on Wednesday in a notice reviewed by Reuters that production would be suspended for Wednesday and Thursday.

The announcement did not provide a reason for the shutdown at the factory, also known as Gigafactory 3, which makes Tesla Model 3 sedans and Model Y crossover sports vehicles.

Many cities across China, including Shanghai, have launched strict movement controls or lockdowns to stem the country's biggest COVID-19 outbreak in two years. The measures have also led to factory closures in some parts of the country, putting pressure on supply chains.

Tesla's Shanghai factory produces cars for the Chinese market and is also an important export hub to Germany and Japan. According to the China Passenger Car Association, the factory shipped 56.515 vehicles in February, including 33.315 for export. The number is an average of about 2.018 vehicles per day.

It was unclear whether the work suspension would apply to other plant operations for the two days.

Two people briefed on the notice said they understood it applies to Tesla's general assembly line. They declined to be named because the information is not publicly available.

The notice did not specify whether the action would match the loss of production, or whether Tesla could make up for any lost output.

Authorities in Shanghai have asked many residents not to leave their homes or workplaces for 48 hours to 14 days while they are testing for COVID or doing contact tracing.

In a separate notice issued Wednesday also seen by Reuters, Tesla asked suppliers to estimate how many workers it would need to reach full production and to provide details of workers affected by COVID restrictions.

The announcement also asks suppliers to prepare workers to live, sleep and eat at factories in a setting similar to China's "closed-loop management" process. Apple supplier Foxconn was allowed to resume some operations at its Shenzhen campus on Wednesday after arranging such an arrangement.

Tesla was notified by one supplier last weekend that its production had been affected by the COVID measures. The supplier told Tesla that the stock could only last for two days.

According to OCBC economist Wellian Wiranto, any protracted Chinese lockdown policy will further destabilize Asian supply chains. He noted that the southern manufacturing hub of Shenzhen alone makes up 11% of China's exports.