Tesla halts production of the Model 3 at the Fremont plant amid a global semiconductor chip shortage
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February 25, 2021 3 min read
This story originally appeared on ValueWalk
Tesla has reportedly told workers that Model 3 production would be halted temporarily. A source told Bloomberg that Tesla would halt Model 3 production at the Fremont plant from Feb. 22 until Mar. 7. The company will reportedly pay employees for Feb. 22 and 23 but not for Feb. 28 or Mar. 1, 2, or 3. Tesla reportedly told the workers to take vacation time if they had any available.
Tesla said to have halted Model 3 production in California
Bloomberg noted that it isn’t unusual for automakers to halt production on some of their assembly lines, but it does cost them revenue. It’s unclear how many vehicles the stoppage will reduce Tesla’s production by this year or how much revenue the automaker will lose out on due to it.
Last month, Tesla said it is working to mitigate the effects of a global chip shortage on its operations. It’s unclear if Tesla’s decision to halt Model 3 production temporarily is related to the semiconductor shortage.
The automaker intends to boost vehicle deliveries by over 50% around the globe this year. The Fremont factory currently produces 500,000 Model 3 and Model Y vehicles per year.
Tesla is part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies managed by their founders or their families, because CEO Elon Musk also co-founded the company. Tesla stock slipped in early trading after the report that Model 3 production was halted.
Details on the chip shortage
Tesla isn’t the only automaker hurt by the semiconductor shortage. General Motors, Ford and Volkswagen have all been hit by it, forcing them to cut production. IHS Markit projects that automakers will produce 672,000 fewer vehicles during the first quarter due to the chip shortage.
If Tesla’s production halt is related to the shortage, there is a chance that it could be extended. The Financial Times reports that GM extended the layoffs it announced in Kansas City earlier this month from temporarily to indefinitely. Ford also slowed production of its F150 pickup truck at its factories in Kansas City and Michigan.
According to Reuters, Samsung said last week that it suspended its Texas factory after the winter storm that caused widespread power outages. The chipmaker did not say which companies buy semiconductors made at the factory, but Tesla revealed in 2019 that its self-driving chips are made at Samsung’s Texas factory. The chip shortage has been going on since at least last month, so the shutdown of the Texas factory exacerbated the problem.