Tesla’s plant in China accounted for more than half of the 936,000 vehicles the company delivered in 2021.
You wouldn’t be able to tell by the company’s stock performance, but Tesla (TSLA) – Get Tesla Inc Report is having a pretty bad week.
Earlier this week, Tesla announced price increases across its entire range of vehicles. It was the electric vehicle maker’s second price increase this month after it increased the cost of some of its long-range models last week.
The Model 3 Rear-Wheel Drive saw its price increase to $46,990 from $44,990 while the Long Range version of the vehicle saw its price increase to $54,490 from $51,990.
On the highest end of the spectrum, the Model X Tri Motor now costs $138,990 after previously costing $126,490.
Inflation is the reason for the price hikes, according to CEO Elon Musk.
But inflation induced-price increases is just one of the fires Tesla is battling this week as the companies production in China.
Tesla Pauses Shanghai Gigafactory Production
The supply chain issues caused by the Covid-19 pandemic that plagued global production in 2021 are returning in China.
The country has tightened pandemic lockdowns as recent outbreaks in 28 of the country’s 31 provinces has resulted in more than 15,000 infections.
As a result of these restrictions, Tesla’s Shanghai factory, which runs 24 hours a day, is being shuttered for Wednesday and Thursday, according to a notice reviewed by Reuters that was sent to suppliers and Tesla staff.
The factory delivered 56,515 Model 3 and Model Y vehicles in February, more than 2,000 a day, according to the China Passenger Car Association. More than 33,000 of those vehicles were delivered overseas, especially to Germany and Japan.
In 2021, Tesla sold more than 150,000 Model 3s in China, a 10% year over year increase. While the company sold 170,00 of the more popular Model Y SUV in the country.
Shanghai officials have actually resisted lockdowns in the city, but other parts of the country where Tesla’s suppliers are located haven’t been as lucky.
Tesla was notified by one supplier last weekend that its production has been affected by the country’s Covid lockdowns and that its stockpiles could only last for two days, Reuters reported.
Tesla’s Deep Ties to China
Tesla is the leading market share leader in the U.S., but Elon Musk and the company know that much of the companies growth aspirations are tied to its performance overseas.
Unlike many U.S. tech companies who have a shaky relationship with the Chinese government, Musk and Tesla enjoy a pretty significant seat at the table.
Earlier this month, Musk took a ride with Qin Gang, the Chinese ambassador to the United States.
The close ties to government officials is paying off for Tesla, which was able to top 50,000 vehicles delivered in each of the final three months of 2021. That rate puts Tesla on pace to deliver more than 600,000 vehicles annually in China. The company produced 470,000 vehicles in China.
Last November, Tesla announced plans to invest 1.2 billion yuan ($187.91 million) to expand production capacity at the Shanghai plant. Tesla is the only foreign passenger car plant in China that is wholly owned by the company and not forced to be operated by a joint venture.
In 2021, Musk said that Tesla’s Shanghai factory has now surpassed the production capacity at its Fremont factory, which produced nearly 450,000 units last year. Tesla has made the Shanghai factory its new main export hub just a couple of years after it started production in December 2019.
