Elon Musk’s EV Business Tesla Temporarily Stops Model 3 Production in California

By Mariliana Fotopoulou Thursday, February 25, 2021

The world’s largest electric vehicle (EV) business Tesla is pausing production at its car factory in California for around two weeks, according to Bloomberg News.

A row of Tesla vehicles.

Weaker Demand?

Tesla staff working on the Model 3 production line at the Fremont plant were informed their line would be temporarily closed from February 22 until March 7. Accordingly, staff were told they would be paid for February 22 and 23 but not for February 28 through March 3.

Shares of Tesla plunged 3.1% before the trading opened on Thursday.

Last month, the EV company said it would attempt to cushion the effects of a global semiconductor chip deficit and that it estimates its global car deliveries to surge by over 50% this year. However, the current production halt will likely harm Tesla’s revenues and production targets.

The EV company has slashed the price of a number of its models this year as many as 14 times in various markets, including China, Japan, and France, raising doubts among analysts that it will meet its profit targets. Furthermore, analysts are worried that the EV business titan may be facing demand challenges.

“When considering Tesla had excess inventory in the fourth quarter of 2020, and has never been able to sell-out its production capacity, we see the company as currently demand constrained, rather than production constrained,” said Gordon Johnson, founder of GLJ Research LLC.

Elon Musk’s company has reportedly slashed the price of the base versions of the Model 3 sedan and Model Y but hiked the prices for performance cars in the United States (US). The price of the Model 3 Standard Rage Plus is now $1,000 lower and costs $36,990, while a Model Y Standard Range is now $39,990, down from $41,990.

On the other hand, Tesla has increased the prices of Performance variants of the Model 34 and Y, with each now costing $1,000 more. The Model 3 and Y now cost $55,990 and $60,990, respectively.

The EV company has also decided to make some of its models more affordable as other car manufacturing giants, including GM, Ford, and Volkswagen, are investing billions of dollars in the development of their own electric cars.

Summary

EV business Tesla has halted Model 3 production between February 22 and March 7 at its California plant, sending Tesla stock lower in pre-open Thursday.

About the Author


Headshot of Mariliana Fotopoulou

Mariliana has an MSC in Consumer Analytics and Business Strategy. She has a special interest in fast-moving industries and Big Data.

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