It turns out the brief shutdown of Tesla’s Gigafactory Shanghai in March didn’t put much of a dent in the company’s financial results for the three months ending March 31. But the April portion of Giga Shanghai’s production halt and the lingering effect of Shanghai’s Covid-19 lockdown will likely show their impact in the coming weeks and take a toll on Tesla’s next quarter’s earnings.
The electric carmaker reported a record quarterly profit of $3.3 billion on $18.8 billion in sales on April 20, far exceeding Wall Street’s expectation of $2.2 billion in profit on $17.7 billion in sales. Quarterly profit jumped 650 percent from a year ago, representing an exponential growth path since Tesla first turned a profit in Q4 2019.
In the first three months of 2022, Tesla delivered just over 310,000 electric vehicles globally, up 68 percent from last year. About 95 percent of those vehicles were Model 3 and Model Y. The higher-end Model S and Model X accounted for the rest.
Tesla produced about 5,000 fewer vehicles than it delivered during the first quarter, making up for the difference from an inventory of already made cars. One possible explanation for the shortfall was a six-day shutdown at Giga Shanghai in March as a result of local Covid lockdown.
The shutdown extended nearly three weeks into April, and the factory only restarted operations this week with about half the staff. Its inventory of parts and components can last only two weeks based on production schedule. With most of the Shanghai city and its surrounding areas still under lockdown, it could take Tesla weeks to get its supply chain back to full speed.
“We did lose a lot of important days of production. There were also a lot of supplier challengers,” CEO Elon Musk told investors during a call on April 20. He expects Tesla’s total second quarter output to be similar, or possibly slightly lower, than that of the first as a result of reduced production in Shanghai.
Giga Shanghai is Tesla’s most productive factory in the world. In normal times, it operates 24 hours a day, seven days a week using three shifts of workers and produces 2,000 vehicles a day for Asian and European markets. Investment bank Credit Suisse estimates the Shanghai lockdown could reduce Tesla’s second-quarter output by roughly 90,000 vehicles.