Executives announced in a conference call with investors that they had ordered the closure of Tesla’s new plant in Shanghai under local government guidance over concerns about the coronavirus, which would delay production of Tesla’s Model 3 model in China. Zach Kirkhorn, Tesla’s finance director, said Production of the Model 3 would be delayed by a week and a half and that the shutdown could “slightly” affect the company’s profitability in the first quarter of 2020.
“At the moment, we expect the Model 3 line in Shanghai to be delayed by a week and a half due to government requests for factory shutdowns, ” he said by telephone. “
Tesla will begin delivering its first cars from its Shanghai plant by the end of 2019. The delivery marks an important milestone for Tesla, which hopes to use its Shanghai plant to establish itself in China, the world’s largest electric car market. Having a local plant can speed up delivery and protect the company from ongoing trade disputes between the U.S. and China. Shanghai Super Factory is China’s first wholly foreign-owned auto factory.
But the new coronavirus could spell trouble with the plan. The new virus, which appeared in Wuhan in early December, has infected hundreds of people in 12 countries. The World Health Organization has previously said it is too early to declare a global public health emergency, even though the outbreak is a major emergency in China. The Shanghai government has made it clear that all companies in the city will not resume operations until February 9.
Analysts in the industry don’t expect Tesla to suffer much financial damage, as the Model 3 made in Shanghai accounts for only a fraction of the company’s quarterly profit.
Tesla isn’t the only company to have been devastated by a virus outbreak. Google said today it will temporarily close all of its offices in China because of the coronavirus. Both Apple and Facebook restricted employees from traveling to China this week.