Tesla Inc. will idle production at its lone U.S. assembly plant, choking off the supply of cars to customers as the quarter comes to a close.
The decision announced in a statement Thursday followed several days of public pressure on Tesla by local police, city managers and health officials about the carmaker continuing to run its California factory despite a county shelter-in-place order. Tesla said the facility will stop production at the end of March 23.
“Despite taking all known health precautions, continued operations in certain locations has caused challenges for our employees, their families and our suppliers,” Tesla said in the statement.
Tesla shares fell as much as 9.7% in late trading. The stock had rebounded during the regular session after plunging 44% over the course of the prior six trading days.
Last month, Tesla took advantage of its then-soaring stock by raising $2.3 billion in an equity offering. That sum, combined with the $6.3 billion cash that was on the balance sheet at the end of last year, “is sufficient to successfully navigate an extended period of uncertainty,” the company said.
The company may burn through about $300 million in cash for every week that production is suspended, Dan Levy, an analyst at Credit Suisse, said in a note to clients. He rates the stock a sell.
Tesla’s solar plant in Buffalo, New York, also will suspend production. Hourly employees at both factories will receive their normal pay through Monday, and then the company will provide paid leave while operations are suspended, according to an internal email.
Several employees expressed relief following the announcement that the roughly 10,000 staffers at the California plant will no longer have to work in close proximity. They described a state of affairs that’s common in manufacturing facilities but worrisome at a time when local health officials are advising at least six feet of social distancing to limit the spread of Covid-19.
“It’s the right thing for Tesla to do. They should have done this sooner,” Gene Munster, managing partner of Loup Ventures, said by phone. “Tesla will survive.”
Tesla said it’s in the process of implementing “touchless” deliveries so that it can continue handing over vehicles to customers safely. It will park cars at a delivery lot and allow them to unlock the doors using a mobile app. The company just started delivering its latest vehicle, the Model Y crossover, this month.
After the announcement, Tesla Chief Executive Officer Elon Musk continued a weeks-long string of tweets in which he’s downplayed the severity of coronavirus. The number of cases worldwide now exceeds 230,000, and the death toll has topped 9,600.
The skepticism hasn’t gone over well on social media. One Tesla customer urged him to re-purpose Tesla’s factory to make ventilators after General Motors Co. offered to do so for the White House.
“You have to stop being an idiot about this,” Raja Abbas, the CEO of a psychiatric company in Pennsylvania, wrote to Musk late Wednesday. “This is a massive disaster. Ask the doctors in the field.”
After Musk replied that he would make ventilators if there is a shortage, New York City Mayor Bill de Blasio told him the country faced a “drastic” dearth of breathing machines and said the city would need thousands over the next few weeks. The two said on Twitter that their respective teams would be in touch.
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