Tesla’s Elon Musk sought to downplay concerns about the electric-car maker’s operations in China last month after a three-week shutdown of its Shanghai plant but that country’s lockdowns and tough restrictions aimed at curbing Covid-19 hammered the company’s production and sales in April and the impact could continue throughout this month.
Tesla sold just 1,512 battery-powered Model 3s and Ys in April, down 98% from 65,814 in March, the China Passenger Car Association said this week. It was the company’s lowest sales volume in China since April 2020, shortly after its Shanghai Gigafactory began producing cars, according to Reuters. Tesla’s decline was far greater than China’s overall drop in new passenger vehicle sales, which fell 34% from March and 36% from April 2021.
“The epidemic in April spread in 29 provinces and cities across the country,” the industry association said in a statement. “In April the whole city of Shanghai was silent, which affected the supply and logistics of parts and components in the Yangtze River Delta and beyond, highlighting Shanghai’s status as a hub in the national auto industry.”
China underpinned Tesla’s profitability for the past year as the country’s demand for electric vehicles, combined with lower parts and labor costs, quickly turned its Shanghai plant into its top source of production in 2021, less than two years after it opened. During the company’s first-quarter results call, when it posted record profit and vehicle deliveries, Musk said despite last month’s shutdown the company might still make up production losses in China in the second quarter.
“Giga Shanghai is coming back with a vengeance,” the company’s billionaire CEO said on the April 20 earnings call. “Notwithstanding new issues that arise, I think we will see a record output per week from Giga Shanghai this quarter–albeit we are missing a couple of weeks.”
Production resumed at the Shanghai plant in late April, initially with workers living at the facility round the clock, though output doesn’t appear to be back to normal levels. A complicating factor is shortages of parts, according to Reuters.
“For Tesla, automakers generally and industries across the board, the easier part of the equation is to get their own plants up and running and their people back to work,” Michael Dunne, a long-time specialist on China’s auto industry, told Forbes last month. “The real large and hard-to-remove obstacles remain the suppliers into those plants.”
Giga Shanghai, which suspended operations from March 28 until April 17, was Tesla’s top production source for the first time in 2021, building 473,078 vehicles compared with 462,949 produced at its Fremont, California, factory. The company recently opened plants in Berlin and Austin that will help offset Tesla’s challenges in China, even as Covid restrictions continue.
“China is obviously a very significant market but it is probably 25% to 30% of our market, long-term,” Musk to the Financial Times at its Future of the Car conference on Tuesday. Currently, China is “sort of a hiccup with the Covid restrictions in Shanghai.”
Tesla fell 8.3% to $734 in Nasdaq trading on Wednesday. The stock is down 39% this year.