Tesla Halts Production in Its Plants for July Up-Gradation Work

    Tesla investors have plenty to analyze after the July 4 holidays with record June production, disappointing quarterly delivery numbers, and several weeks of downtime at multiple plants.




    The Impact of Weak Quarterly Performance

    As Bloomberg reported last month, the EV maker will halt its model Y production in Shanghai for the first fortnight of July. From July 18, the model 3 line will be stopped for 20 days. The factory up-gradation work to boost the output of both the models is expected to complete by early August.

    TeslaMag said that the carmaker plant in Berlin would also take a two-week break starting from July 11. As per sources, Tesla aims to double its production from the German facility from August. The company manufactured 1000 units of Model Y in at least one week in June.

    The company did not disclose these plans in its July 2 production and delivery statements. Tesla’s upbeat headline stated that it produced more vehicles in June than in any month of the company’s history. It delivered 254 695 cars for the quarter, which fell short of analysts’ estimates.

    According to Philippe Houchois, an analyst with Jefferies with a buy rating on Tesla, a weak quarter was expected. He wrote about CEO Elon Musk describing the new plants as money furnaces which meant that the free cash flow was affected by the significant working capital disruption.

    The last quarter’s performance suffered the biggest blow from the prolonged lockdown of its Shanghai factory due to the Covid outbreak. The company to extraordinary measures is to keep the factory open and running, with thousands of its workers sleeping on factory floors to maintain production partially.

    Its most productive plant of Tesla is in Shanghai. In contrast, the new factories in Austin, Texas, and near Berlin have just started gaining production pace. Musk hosted an opening party in Berlin on March 22 and Austin on April 7. While those events were jovial when Musk danced at the Germany party a d later donned a cowboy hat and shades in Austin, the CEO was subdued after a few weeks.

    Austin and Berlin are losing billions of dollars as the operating expenses are enormous, and there is hardly any output, according to Musk, who addressed on May 31 the Tesla Owners in Silicon Valley. Musk said that his immediate priority is getting the Shanghai plant fully on course and plants at Austin and Berlin fully functional.

    The record drop of Tesla shares which plunged nearly 38% in the last quarter ending June was caused by the struggle to ramp up production in new plants and the shutdown at the Shanghai plant. The S&P 500 index had slumped 16% during the same period, its biggest decline since the first quarter of 2020.

    Tesla is scheduled to declare its second-quarter earnings on July 20.



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