Tesla Pauses Plants After Shaky Quarter

TAfter the July 4th holiday, investors at esla Inc. will have a lot to look over: a poor quarter of deliveries and a record month in production. There are also several weeks worth of downtime at different plants.

Bloomberg last month reported that electric car maker Tesla will suspend most production at its Model Y Shanghai assembly line during July’s first two week. After this, the line will be shut down for a twenty-day period beginning July 18th. According to people familiar with this matter, the factory will complete its upgrades to improve the production of the two vehicles by early August.

On Monday, TeslaMag said the carmaker’s plant near Berlin will take a two-week break starting July 11. German media reported that Tesla intends to nearly double its production rates starting in July, according to an unidentified source. Built by the company 1,000 Model YsAt the factory for at least one month.

Tesla didn’t mention these plans in its July 2 production and deliveries statement. The carmaker offered an upbeat line— it made more vehicles in June than any month in its history—while disclosing 254,695 deliveries for the quarter, short of analysts’ estimates.

The “relative weakness” of the quarter was expected, Philippe Houchois, a Jefferies analyst with a buy rating on Tesla shares, said in a July 3 note. He wrote that Chief Executive Officer Elon Musk’s comments referring to the company’s new plants as “money furnaces” suggest Tesla’s free cash flow may have been affected by significant working capital disruptions.

The biggest blow to Tesla’s performance last quarter came from Shanghai’s weeks-long lockdown in response to a Covid outbreak. With thousands of workers staying on-site to continue partial production, the company took extraordinary measures to restore its factory.

Whereas Shanghai is Tesla’s most productive plant, its factories near Berlin and Austin, Texas, are only just getting going. Musk hosted an opening party for the first on March 22, and the second on April 7.

While those were jovial affairs—Musk danced in Germany and donned a cowboy hat and shades in Texas—the CEO sounded much more subdued a few weeks later.

“Berlin and Austin are losing billions of dollars right now because there’s a ton of expense and hardly any output,” Musk told the Tesla Owners of Silicon Valley on May 31. “Getting Berlin and Austin functional and getting Shanghai back in the saddle fully are overwhelmingly our concern.”

Tesla shares plunged 38% during the third quarter, due to difficulties in setting up new plants and the Shanghai Shutdown. This was a quarterly record. The S&P 500 slumped 16%, the biggest decline for the benchmark US stock index since the first quarter of 2020.

Tesla has scheduled the July 20th quarterly earnings report.

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