You won’t be able to tell from the company’s stock price, but Tesla (TSLA) – Get the Tesla Inc report, the company is having a pretty bad week.
Earlier this week, Tesla announced a price increase across its entire lineup of vehicles. It was the electric car maker’s second price hike this month after it increased the cost of some of its long-range models last week.
The price of the rear-wheel drive Model 3 increased to $46,990 from $44,990, while the longer-range version of the car increased to $54,490 from $51,990.
The Model X Tri Motor is now $138,990, up from $126,490.
According to CEO Elon Musk, the reason for the rise in prices is inflation.
But inflation-driven price increases are just one of the fires Tesla is fighting this week as the company manufactures in China.
Tesla suspends production at gigafactory in Shanghai
Supply chain problems caused by the Covid-19 pandemic, which hampered global production in 2021, are returning to China.
The country has tightened restrictions on the pandemic as recent outbreaks in 28 of the country’s 31 provinces have infected more than 15,000 people.
As a result of these restrictions, Tesla’s Shanghai plant, which operates 24 hours a day, is closing for Wednesday and Thursday, according to a notice reviewed by Reuters that was sent to Tesla’s suppliers and staff.
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The plant delivered 56,515 Model 3 and Model Y vehicles in February, more than 2,000 vehicles per day, according to the China Passenger Car Association. Over 33,000 of these vehicles were delivered overseas, especially to Germany and Japan.
In 2021, Tesla sold more than 150,000 Model 3 vehicles in China, up 10% from last year. At the same time, the company sold 170,000 of the most popular Model Y SUVs in the country.
Shanghai officials have actually resisted lockdowns in the city, but other parts of the country where Tesla suppliers are located have not been so fortunate.
Over the weekend, a supplier notified Tesla that its production was affected by Covid restrictions in the country and that it could only last two days in stock, Reuters reported.
Tesla’s close ties with China
Tesla is the leading market leader in the US, but Elon Musk and company know that much of the company’s growth aspirations stem from its overseas performance.
Unlike many US tech companies that have a rocky relationship with the Chinese government, Musk and Tesla have a fairly large seat at the negotiating table.
Earlier this month, Musk took a ride with Qin Gang, China’s ambassador to the US.
Close ties with government officials are paying off for Tesla, which has been able to surpass 50,000 vehicles delivered in each of the last three months of 2021. This figure allows Tesla to deliver more than 600,000 vehicles to China annually. The company produced 470,000 vehicles in China.
Last November, Tesla announced plans to invest 1.2 billion yuan ($187.91 million) to expand manufacturing capacity at its Shanghai plant. Tesla is the only foreign passenger car factory in China that is wholly owned by the company and does not have to be operated by a joint venture.
Musk said in 2021 that Tesla’s Shanghai plant had surpassed the capacity of its Fremont plant, which produced almost 450,000 units last year. Tesla has made the Shanghai plant its new main export hub just a couple of years after starting production in December 2019.