Tesla Scales Back Model 3 Output Amid Supply Chain Woes

Tesla Inc. told workers it will temporarily halt some production at its car-assembly plant in California for about two weeks, according to a person familiar with the matter.

Staff on a Model 3 production line in Fremont were told their line would be down from Feb. 22 until March 7, though some Model 3 employees were back in the factory Feb. 24, said the person, who asked not to be identified because the information is private.

Tesla Scales Back Model 3 Output Amid Supply Chain Woes

Tesla is battling supply-chain issues due to backlogs at ports and severe snow storms affecting ground transport, according to another person familiar with the matter. Representatives for the Palo Alto, California-based electric-car maker didn’t respond to messages seeking comment.

While production-line outages aren’t unusual for automakers, they cost the companies revenue. Tesla has said capacity issues at ports and semiconductor shortages are affecting its supply chain. Chief Finance Officer Zach Kirkhorn said on an earnings call last month the company is working to manage the disruptions, saying they “may have a temporary impact.”

“We are not overly concerned this supply chain/factory disruption changes the overall delivery trajectory for 1Q and 2021,” Dan Ives, a Wedbush Securities analyst with a neutral rating on Tesla’s stock, wrote in a research note published Thursday.

Tesla shares pared a drop of as much as 6.3% to trade down 5.2% to $703.52 as of 12:18 p.m. in New York.

The California plant is still the most important part of Tesla’s vehicle-production base, with capacity to make an estimated 600,000 vehicles a year.

The affected workers were told they would be paid for Feb. 22 and Feb. 23 and not paid for Feb. 28, March 1, 2 and 3. They were advised to take vacation time, if they had it.

Chief Executive Officer Elon Musk also has opened a plant near Shanghai and is constructing facilities outside Berlin and in Texas.

Tesla has cut the price of its various models 14 times in markets including China, Japan and France this year, according to GLJ Research LLC founder Gordon Johnson, who has a sell rating on the stock.

“When considering Tesla had excess inventory in the fourth quarter of 2020, and has never been able to sell-out its production capacity, we see the company as currently demand constrained, rather than production constrained,” Johnson wrote in a note earlier this week.

©2021 Bloomberg L.P.

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