Following recent pressure from local authorities, Tesla (TSLA 2.63%) announced Thursday afternoon that it is shutting down its factory in Fremont, California, next week. The move, of course, is in response to a rapidly evolving situation amid the coronavirus outbreak.
Not being able to produce vehicles in Fremont will undoubtedly weigh on total vehicle production during the last week of first quarter and into the beginning of the second quarter, or until the factory reopens. Furthermore, since the automaker's deliveries track closely with production, vehicle deliveries in 2020 will likely be negatively impacted as well.
Tesla factory. Image source: The Motley Fool.
Shut down
Tesla will "temporarily suspend production at our factory in Fremont, from end of day March 23, which will allow an orderly shutdown," the company said in an 8-K filing with the SEC.
The automaker was recently asked by Alameda County in California to stop production at the factory. But Tesla reportedly continued to manufacture vehicles. Tesla said in an email to employees that it would make changes to its workspace "while honoring our government commitment to keep our national critical infrastructure running."
The automaker had notably taken extra precautions to fight against the coronavirus, including asking employees who weren't involved in production, service, deliveries, and other critical jobs to not come into work. In addition, the company had urged employees who were not feeling well or were concerned to "contact your manager and stay at home. We respect your decision."
Now, Tesla is shutting down manufacturing.
The company explained the decision in its SEC filing:
In the past few days, we have met with local, state and federal officials. 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.
Tesla said it will also be shutting down its factory in New York, where it makes solar energy generation products. But the automaker's battery factory in Nevada and its service and Supercharging network will remain in operation.
Equipped to face headwinds
Fortunately, thanks to a well-timed capital raise last month, Tesla has plenty of capital to weather a storm. On top of the $6.3 billion of cash it reported at the end of Q4, the automaker has the $2.3 billion it raised in February. Furthermore, Tesla has $3 billion of credit lines and it has secured financing for the continued expansion of its factory in Shanghai.
"We believe this level of liquidity is sufficient to successfully navigate an extended period of uncertainty," Tesla said.
