Tesla pays its Shanghai workers an extra $63/day to work during the lock down
#Tesla pays its #shanghai workers an extra $63/day to work during the #lockdown
#China is responsible for most of the global auto #growth in the 21st century.
The Shanghai area is a key auto manufacturing area for global supply chains. There will be strong ripple effects of the current lock downs both inside and outside China.
For Tesla, roughly half of its workers have returned to the factory. There is a current ramp up to a single shift will run 12 hours a day, 6 days a week. To open the factory, a full anti-covid regimen must be implemented that includes daily testing, effectively housing and feeding staff on-site 24 hours a day, and other measures.
Workers will be given a 400RMB/ day bonus ($63). The factory can produce at roughly half capacity (about 40-50 cars/hour, about 25,000 cars/month) in a closed-loop system. Many workers cannot get to the facility due to travel restrictions inside Shanghai. Each district and sub-district has its own requirements for movement of logistics or people.
Tesla has roughly one week of supplies and parts, which means by the end of April/beginning of May, without new deliveries, production will grind to a halt.
Despite pleas to suppliers to get goods in, the reality is inter-provincial logistics in the Shanghai region (YRD) is extremely challenging and nearly impossible given the current situation. Each local area has their own rules for truckers, testing, type of products that can be delivered, etc. In some cases, drivers are put into forced quarantine when crossing boundaries. Logistics costs have also exploded as few trucks and drivers are able to deliver across regional/city/district/sub district/industrial parks, each of who have varying requirements.
It is estimated that Tesla has lost 50,000 units of production since the beginning of March (roughly 16B RMB in revenue, or $2.5B at current Model Y prices), and will continue to lose roughly half of its production in May (roughly 8B RMB in revenue, or $1.25B). If production ceases again due to lack of workers or parts, or they cannot ramp up to a second shift in May, they could lose most of the revenue for May, and it could easily bleed into June. The company could lose 100,000 cars, or more, of production due to these challenges. This does not include various parts made in the Shanghai area that are shipped globally for production at other sites.
How will this affect 2022 revenues for Tesla? Except a hit of roughly $5 billion to China revenues at a minimum. Check back for more updates when this is over.
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