Tesla Loses Over $2.5 Billion Due To Giga Shanghai Shutdown
Tesla’s China factory has quickly become the EV maker’s most important manufacturing hub. According to Tesla’s most recent quarterly earnings note, the factory already has an annual production capacity of over 450,000 vehicles.
That is monthly production of over 37,500 vehicles. However, from all publicly available information, this number is a massive sand bang on Tesla’s part. We know Tesla’s Shanghai factory just in December 2021 was able to produce over 70,000 vehicles.
This easily gives the plant a run rate of over 800,000 vehicles a year. Yes, December was the most number of vehicles Tesla had produced in a single month. And, in the consecutive 3 months, Tesla’s production has slightly gone down.
Still, in the first quarter of 2022 Tesla was able to produce 182,174 vehicles just from Giga Shanghai. That is an average monthly production run rate of over 60,000 vehicles. And that is under China’s Zero Covid policy which Elon Musk has called a big challenge for Tesla in the first quarter.
Meaning, that if allowed to operate at its maximum potential, Tesla’s Shanghai Gigafactory can easily return to December's record 70,000 production numbers. However, making things even more challenging, for the past 3 weeks, Tesla’s China factory, together with the entire city of Shanghai, has been forced to shut down due to a surge in COVID cases.
This means Tesla has lost sales on over 50,000 vehicles in the past 3 weeks. It’s difficult to say what the exact mix and selling price of these vehicles is but if we take an average selling price of $50,000 this means Tesla has lost over $2.5 billion just from this shutdown.
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There are reports the EV maker is planning to begin production this Monday however, the plant is expected to open in a limited capacity and it’s going to take several weeks before production can ramp to Dember 2021 numbers. This means the losses can easily surpass $3 billion.
Tesla raised prices on the Model Y twice in the past month. How many more times do you think Tesla will raise prices for the Model Y before June 1st?" https://t.co/xyNlhM24gL pic.twitter.com/qtvC2CGsuH
— Torque News (@torquenewsauto) April 16, 2022
Giga Shanghai’s shutdown is certainly disappointing for Tesla investors and EV enthusiasts at large. However, it also signals how far Tesla has come. In 2018 the EV maker was on the edge of bankruptcy but, fast forward 4 years, and Tesla is now a company that generates billions from a single factory in just a few weeks.
As of now, Tesla’s losses caused by the Giga Shanghai closer is still our educated guess but, to know the full extent, we will have to wait until June when Tesla releases Q2 2022 earnings report. However, we will be sure to keep you posted as more information becomes available. Until then, make sure to visit our site torquenews.com/Tesla regularly for the latest updates.
So what do you think? Do you agree with the Chinese government's decision to shut down the city of Shanghai? What do you think Tesla should do to avoid such kind of losses going forward? Let me know your thoughts in the comments below.
Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.