(This is an update of an earlier story.)
Tesla CEO Elon Musk advised workers that the company’s Fremont, California plant will be ramping back up to normal after shutting down early this week due to a shortage of critical microchips.
Tesla became the latest in a growing list of auto manufacturers hobbled by the shortage, including industry giants like General Motors, Toyota, Volkswagen, Nissan, Stellantis and Honda, as well as numerous smaller carmakers. As many as 1 million vehicles could be culled from global production schedules due to the shortage, according to new reports.
“We are experiencing some parts supply issues, so we took the opportunity to bring Fremont down for a few days to do equipment upgrades and maintenance,” Musk told employees in a letter first obtained by website Electrek. “Fremont production is back up and running as of yesterday and will speed up rapidly to full Model 3/Y production over the next few days.”
Production cuts originally expected to run through March 7
Tesla has not responded to several requests for comment. Word of the move at its Fremont plant first surfaced mid-week, numerous reports noting that plant employees were told the shutdown could extend from February 22 through March 7. The automaker and its CEO have not explained how Tesla was able to now resume production.
Workers had been advised that they would only be paid for some of the days work was halted and that they should take vacation time for the rest of the period, according to a report by Automotive News.
The auto industry, in general, has been struggling to deal with chip shortages compounded by the COVID pandemic. The industry initially ordered reductions in parts purchases due to expectations that car sales would decline sharply after last spring’s nationwide lockdowns. Sales, however, have rebounded sharply and manufacturers are racing to rebuild vehicle inventories, straining supplies of the microchips now used in all vehicles.
That rebound now appears likely to be slower than hoped for, however. Total global production in 2021 could fall 1.3 million vehicles short of what industry manufacturers had been aiming for, according to a new report by Auto Forecast Solutions.
EVs could be especially hard-hit by chip shortages
Virtually every automaker, from General Motors to Toyota, has had to slow production or close plants. But the impact is particularly severe on electric vehicles due to the fact they use more semiconductors than conventional, gas-powered vehicles, several sources have told TheDetroitBureau.com.
President Joe Biden this week took steps aimed at pressing chipmakers to boost supplies for the auto auto industry.
In Tesla’s case, the general shortage of chips appears to have been compounded by the severe winter storm that crippled Texas. Samsung Electronics last week said it suspended production at a semiconductor plant in the Lone Star State. Tesla identified that factory as the source of chips used in its semi-autonomous Autopilot system.
Texas ice storm complicates problems for Tesla
It is not clear whether any of the chips produced in Texas are used for Tesla products rolling out of the automaker’s second plant in China.
Tesla produced nearly 500,000 vehicles last year, a record that helped the company achieve a full-year profit for the first time in 2020. The vast majority of those vehicles were assembled at Fremont which has a capacity of somewhere between 500,000 and 600,000 annually.
Tesla hoped to increase sales by 50% in 2021, a plan that likely would push Fremont closer to capacity. So, even the brief shutdown in California could make that target difficult to achieve unless Tesla makes up volume later through faster line rates and overtime.
Production cuts risky as Tesla faces more competition
A shortage could also mean delays for potential buyers. That might have been acceptable a couple years ago when Tesla was virtually alone among manufacturers of long-range battery-cars. This year brings a rapid acceleration in the roll-out of competing products from companies like GM, Ford, Volkswagen, Volvo and numerous players in China.
Tesla is struggling to retain a leading market position in that Asian market after opening up its second plant in Shanghai. It is readying another factory in Berlin to supply the EU market where it has also lost its lead. A fourth factory, in Texas, is now under construction, as well.
The production cuts took a quick hit on Tesla stock. The automaker’s share price more than quadrupled in 2020 but have fallen sharply since peaking at just over $900 last month. TSLA shares stumbled sharply when news of the Fremont closure was first reported. The stock rebounded slightly on Friday morning but is still well off that peak, hovering around $680 midday.