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Tesla to Suspend Production in California Over Coronavirus Concerns

By John Bromels - Mar 19, 2020 at 7:24PM

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Officials say Elon Musk's company is not considered an "essential business."

On Thursday afternoon, Tesla (TSLA -6.42%) said in an operational update that it would temporarily suspend production at its Fremont, California, factory, starting at the close of business on Monday, March 23. Tesla shares fell in response.

The suspension comes in response to a Monday order by six Bay Area counties, including Fremont's Alameda County, for residents to "shelter in place." The order limits business activity to "essential services" like grocery stores and pharmacies.

A Tesla Model Y, in a dark room.

Tesla is officially suspending its U.S. auto production, including the popular Model Y. Image source: Tesla.

Not essential

A Tuesday tweet from the Alameda County Sheriff's Office stated that Tesla's production would not be considered an essential service and the company would only be able to "maintain minimum basic operations." Earlier reports had suggested CEO Elon Musk might attempt to defy the order. 

Tesla will also suspend production at its New York factory "except for those parts and supplies necessary for service, infrastructure and critical supply chains." That facility manufactures solar cells and not cars. The company's other operations will continue.

Because the Fremont factory is Tesla's only automobile manufacturing location in the U.S., the move is likely to cause a massive and immediate disruption to the company's operations. It will apparently no longer be able to produce its vehicles, including the best-selling Model 3 and the new Model Y, which Tesla only began delivering on Monday

Model 3 deliveries may continue

The company suggested deliveries of its popular vehicles may continue through a "touchless delivery" system currently under development. The proposed system would use the cars' over-the-air software connectivity to allow customers to unlock their new vehicles via the Tesla App, sign paperwork that has been pre-placed inside, and drop it off onsite.  

The announcement is likely to reverse the gains Tesla made after an analyst's upgrade sent the share price up 12.2% for the day on Thursday.

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