Tesla Inc is to idle production at its lone US assembly plant, choking off the supply of vehicles to customers as the quarter comes to a close.
The decision announced in a statement on Thursday followed several days of public pressure on Tesla by local police, city managers and health officials about the automaker continuing to run its California factory despite a county shelter-in-place order.
Tesla said the facility would stop production at the end of Monday.
“Despite taking all known health precautions, continued operations in certain locations has caused challenges for our employees, their families and our suppliers,” Tesla said in the statement.
Tesla shares fell as much as 9.7 percent in late trading. The stock had rebounded during the regular session after falling 44 percent over the course of the prior six trading days.
Last month, Tesla took advantage of its then-soaring stock by raising US$2.3 billion in an equity offering.
That sum, combined with the US$6.3 billion cash that was on the balance sheet at the end of last year, “is sufficient to successfully navigate an extended period of uncertainty,” the company said.
The company might burn through about US$300 million in cash for every week that production is suspended, Credit Suisse analyst Dan Levy said in a note to clients. He rates the stock a sell.
Tesla’s solar plant in Buffalo, New York, also would suspend production. Hourly employees at both factories would receive their normal pay through Monday, and then the company would provide paid leave while operations are suspended, an internal e-mail said.
Several employees expressed relief following the announcement that the roughly 10,000 staffers at the California plant would no longer have to work in close proximity. They described a state of affairs that is common in manufacturing facilities, but worrisome at a time when local health officials are advising at least six feet of social distancing to limit the spread of COVID-19.
“It’s the right thing for Tesla to do. They should have done this sooner,” Loup Ventures managing partner Gene Munster said. “Tesla will survive.”
Tesla said it is in the process of implementing “touchless” deliveries so that it can continue handing over vehicles to customers safely. It will park cars at a delivery lot and allow them to unlock the doors using a mobile app.
The company just started delivering its latest vehicle, the Model Y crossover, this month.
After the announcement, Tesla chief executive officer Elon Musk continued a weeks-long string of tweets in which he has downplayed the severity of COVID-19.
The skepticism has not gone over well on social media. One Tesla customer urged him to repurpose Tesla’s factory to make ventilators after General Motors Co offered to do so for the White House.
“You have to stop being an idiot about this,” Raja Abbas, the CEO of a psychiatric company in Pennsylvania, wrote to Musk late on Wednesday. “This is a massive disaster. Ask the doctors in the field.”
After Musk said that he would make ventilators if there is a shortage, New York City Mayor Bill de Blasio said the country faced a “drastic” dearth of breathing machines and the city would need thousands over the next few weeks.
The two said on Twitter that their teams would be in touch.
NOT ALL GOOD: Analysts warned that other data for last month might be less rosy due to the virus and analysts expect the PMI to contract again next month Chinese factory activity saw surprise growth last month as businesses went back to work following a lengthy shutdown, but analysts said that the economy faces a challenging recovery as external demand has been devastated by the COVID-19 pandemic, while the World Bank said that growth could screech to a halt. China is slowly returning to life after months of tough restrictions aimed at containing the virus, which put millions of people into virtual house arrest and brought economic activity to a near standstill. The strict measures saw a closely watched gauge of manufacturing plunge to its lowest level on record in February,
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