Though Tesla (TSLA +3.14%) was able to deliver an impressive number of vehicles in the first quarter, even amid global supply chain challenges that have plagued the automotive industry, investors have been concerned about a pause in production at the company's factory in Shanghai. Rising COVID-19 cases in the city have led the government to put in place lockdowns, affecting companies like Tesla. The high-output electric-vehicle (EV) factory has been shut down for about three weeks, putting a dent in the company's production plans for 2022.
But Reuters reported on Friday that the important factory is scheduled to resume production on Monday.
NASDAQ: TSLA
Key Data Points
Estimating the negative impact on Tesla
With estimates of Tesla's vehicle output at its Shanghai factory at about 2,000 units per day, the company likely missed out on around 40,000 vehicle deliveries during its Shanghai factory shutdown. Putting this into perspective, the company's total quarterly deliveries recently have been coming in at more than 300,000 units. The impact on its business, therefore, has been significant in the near term.
But since the shutdown might be limited to only three weeks, the harm could prove to be small in the context of full-year deliveries.
There's always a possibility, however, that Tesla puts its planned Shanghai restart next week on hold. After all, it was already supposed to start production at the factory several times but ended up delaying the restart for various reasons.
A Tesla factory. Image source: The Motley Fool.
Ramping up could take time
Furthermore, investors should realize that it could take some time for Tesla to return to the production levels it achieved earlier this year. Indeed, Reuters said Tesla will likely "start with one shift and would gradually ramp up."
Tesla's saving grace is the fact that it has new factories ramping up production in Germany and Texas right now. These new factories add to the company's output at its original factory in California. But there's uncertainty about how much Tesla's U.S.-based factories and its factory in Berlin are dependent on arrangements with suppliers in Shanghai.
Considering all of the information available to investors, the total impact of the three-week shutdown could be meaningful for Tesla but not so significant that the investors should worry. However, this conclusion assumes production in Shanghai really does resume on Monday. So investors should watch closely next week to see if Tesla really can get back to work in Shanghai.
Management had guided for full-year deliveries to grow more than 50% this year. But Shanghai production was expected to play an integral role in achieving this growth. Investors might get an update on this full-year outlook next week, when Tesla reports earnings after market close on Wednesday, April 20.
