May 13, 2022

Tesla Motors, Inc. (NASDAQ:TSLA), (XPEV) – Tesla reportedly plans ‘closed-loop production system’ as Giga Shanghai prepares to restart

Tesla, Inc. (NASDAQ: TSLA) may finally be gearing up to restart operations at its Giga Shanghai, with multiple reports indicating some degree of reopening by the coming week.

What happened: The latest rumor circulating is that Tesla is considering something called a “closed-loop production” system, starting Sunday. Bloomberg reported that the company asked its employees to enter the closed-loop exit system in order to restart operations in phases.

Giga Shanghai has been closed for around three weeks, the longest since its inception in late 2019.

The closed-loop production system will require employees to live on-site, and those employees will be regularly tested for COVID, the report said, citing unnamed sources.

To circumvent restrictions imposed by local districts and residential complexes, the company would issue a special certificate to employees it called. These workers will then be shuttled to the factory, the report adds.

Since the company plans to gradually ramp up production, it will be a long time before production returns to pre-shutdown levels. However, this plan is subject to change depending on the Chinese government’s COVID prevention policy.

Related Link: EV Week in Review: Tesla Investors Are Losing Sleep Over Musk’s Divided Attention, Ford F-150 EV Truck Has a Release Date, GM Stitches Battery Material Deal And More

A Reuters report had earlier suggested Tesla would gradually resume production, starting Monday, but provided no details on the modus operandi.

Why it matters: Given that the plant was closed for three weeks and its production capacity is 2,100 cars per day, the company may have lost production of around 44,100 cars, Bloomberg estimates. This represents around 14.5% of the company’s global production, the publication adds.

XPeng, Inc. (NYSE: XPEV) He Xiaopeng recently called on authorities to take concerted action to help restore normalcy, a WeChat message from the CEO revealed. He also raised the specter of a prolonged shutdown in May if the situation does not improve.

China’s COVID-19 lockdown couldn’t have come at a worse time for the electric vehicle industry, which was already reeling from input cost inflation and component shortages triggered by the war between Ukraine and Russia.

Tesla closed Friday’s session down 3.66% at $985.

Related Link: How Tesla Stock Can Be Overvalued and Significantly Undervalued at the Same Time

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