Tesla Shanghai to Halt Production Temporarily. It Isn’t Covid.

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An aerial view of Tesla Shanghai Gigafactory.

Xiaolu Chu/Getty Images

plant near Shanghai is going to shut down temporarily, according to reports. The downtime will add some uncertainty into third-quarter numbers for the electric-vehicle pioneer.

On Wednesday, Reuters reported that Tesla (ticker: TSLA) will shut down production in China for a couple of weeks at the start of July to upgrade equipment. Other news outlets, however, reported the shutdown will be a few days, citing an email translated from Chinese. Tesla didn’t return a request for comment.

In either case, halted production probably isn’t what investors want to hear during what has proven to be a strange second quarter so far. At least this production pause isn’t because of Covid-19.

Either way, regular plant shutdowns in the auto business aren’t all that surprising. Investors’ antennae are up, however, because of what has come before for Tesla.

The Shanghai Gigafactory has been either shut or operating at reduced capacity since late March as China struggled to contain Covid-19 outbreaks. Local lockdowns have affected the entire auto industry. Recent reports have the plant operating at about 70% of its potential capacity.

Tesla delivered about 310,000 vehicles in the first quarter of 2022 and was expected to deliver about up to 350,000 units in the second quarter.  That, however, was before China’s most recent Covid-19 surge. Now estimates are all over the place, ranging from about 250,000 to 323,000 units, according to FactSet. (Not all analysts update numbers as frequently as others.)

Tesla should report second-quarter deliveries this coming week, on or around July 2. It will be interesting to see how investors react.

Tesla stock hasn’t been hurt too much by the shutdown reports. Shares are down roughly around 1% since reports surfaced Wednesday. That isn’t too far out of line compared with the

S&P 500

and the

Nasdaq Composite

Year to date, Tesla stock is off about 34%. Higher inflation and interest rates have hit automotive stocks harder than most.

Write to Al Root at allen.root@dowjones.com

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