Written by Brenda Nakalema

Tesla Shanghai to Halt Production Temporarily. It’s Unrelated to Covid.

Tesla’s (ticker: TSLA) plant near Shanghai is going to be temporarily shut down, according to sources. The downtown creates even …

Tesla’s (ticker: TSLA) plant near Shanghai is going to be temporarily shut down, according to sources. The downtown creates even more uncertainty to a situation that’s already been riddled with much controversy, especially pertaining to its billionaire founder. This uncertainty might affect third-quarter numbers for the EV maker.

Wednesday trading opened with reports that the company would shut down production in China for a couple of weeks at the start of July in a planned equipment upgrade. However, the reports have been confusing as other news outlets said that the shutdown was only expected to last a couple of days.

Whatever the case, halted production could have the effect of spooking investors, especially not after the different headwinds the company has already faced. The one piece of good news is that the shutdown isn’t related to covid-19, which creates some level of comfort.

The Shanghai Gigafactory has been oscillating between being shut or operating at a reduced capacity since late March, especially as China struggled to contain Covid-19 and enforced strict lockdowns. Local lockdowns have had a negative effect on the entire auto industry. Recent reports have the plant operating at roughly 70% of its potential capacity.

Telsa delivered roughly 310,000 vehicles in the first quarter of 2022 and was expected to further deliver another 350,000 units in the second quarter. However, these projections were made before China’s recent surge of Covid-19. Now, with these extraneous components factored in, estimates seem to be all over the place, ranging from roughly 250,000 to 323,000 units, according to FactSet. Telsa is expected to report second-quarter deliveries in the following week.

Despite this shaky news, Investor confidence hasn’t been affected much as the stock seems to be holding steady. Shares dropped roughly 1% since reports surfaced. That seems to be in tandem with the S&P 500 and the Nasdaq Composite, which gained 0.95% and 1.62%, respectively.

Year to date, Tesla stock has dropped roughly 34%. The culprit is the higher inflation and interest rates, which have had the biggest effect on automotive stocks.