Tesla Said To Face Delay In Ramp-Up Of Giga Shanghai Output To Pre-Lockdown Levels

Tesla, Inc.'s (NASDAQ: TSLA) Giga Shanghai plan to ramp output to levels before the latest COVID-19 lockdown may be delayed by at least a week, Reuters reported on Monday, citing an internal company memo.

What Happened: Tesla plans to go with the "one-shift production schedule" currently in place at Giga Shanghai in the current week, the company reportedly said in the memo. 

That would mean the company can churn out vehicles at a daily production rate of 1,200 units.

Tesla expects to increase Giga Shanghai's output to 2,600 units per day from May 23, according to the report, which added that the company scaled back production to an anemic pace last week, reflecting supply, production and logistical challenges.

The delay could be a function of all these factors. As Shanghai is yet to lift COVID-19 lockdown restrictions, companies in the area have to operate under a closed-loop production system to prevent the spread of COVID-19.

Shanghai is reportedly planning for a broader lifting of restrictions, beginning on June 1.

Related Link:  How Tesla Is Helping Home State Texas Reduce Heatwave Strain On Its Electric Grid 

Why It's Important: Tesla's Giga Shanghai currently has a production capacity of around 600,000 units, and its output caters to both domestic and international markets. The company is planning to expand the plant's capacity to 900,000 units.

Apart from volume contribution, Giga Shanghai also has a healthy impact on Tesla's profitability. Vehicles churned out from this plant have a higher margin than the ones rolling out of its U.S. plant due to cheap labor.

April sales data released by the China Passenger Car Association showed that Tesla's sales slumped by 98% month-over-month to 1,512 vehicles, while production fell sharply to 10,757 units. Giga Shanghai was shut down for nearly three weeks in April amid a coronavirus resurgence.

Price Action: Tesla shares closed Friday's session up 5.71% at $769.59, according to  Benzinga Pro data. 

Related Link: Tesla Gets Invite From Malaysia PM To Set Up Factory