Tesla pauses output in Germany, China after ending shaky quarter, reports say

Tesla has experienced turbulent times recently with a disappointing quarter of deliveries, a record month of production, and now, it seems,. several weeks of downtime at assembly plants near Berlin and in Shanghai.

The automaker will halt most production on the Model Y assembly line in Shanghai for the first two weeks of July, then stop the Model 3 line for a 20-day stretch starting July 18, Bloomberg reported last month.

Upgrade work at the factory to boost output of both vehicles is expected to be completed by early August, people familiar with the matter said.

On Monday, TeslaMag said the automaker’s German plant will take a two-week break starting July 11. The German site reported that Tesla aims to roughly double the production rate starting in August, citing an unidentified source.

The shutdown had been planned for a longer period, TeslaMag said. Previously, several media had reported on the plans.

Germany’s RBB broadcaster reported on Monday that the break, which will last until July 22, will allow production processes at the car factory to be optimized and readjusted.

The Bild newspaper cited the TeslaMag report as saying that part of the overhaul at the plant would concentrate on making sure car bodies only spend 30 seconds at each manufacturing station, instead of currently spending up to three minutes at each stage.

Tesla has said it wants to produce 500,000 cars a year in Grünheide. But so far, the plant is only producing 1,000 cars a week -- about a tenth of the plan, Bild said, adding that it is unclear how many of the 4,500 employees will be sent on vacation and how many technicians will remain to reorganize production.

Tesla did not mention these plans in its July 2 production and deliveries statement. The automaker offered an upbeat line -- it made more vehicles in June than any month in its history -- while disclosing 254,695 deliveries for the quarter, short of analysts’ estimates.

The “relative weakness” of the quarter was expected, Philippe Houchois, a Jefferies analyst, said in a July 3 note.

He wrote that CEO Elon Musk’s comments referring to the company’s new plants as “money furnaces” suggest Tesla’s free cash flow may have been affected by significant working capital disruptions.

The biggest blow to Tesla’s performance last quarter came from Shanghai’s weeks-long lockdown in response to a COVID outbreak. The company went to extraordinary lengths to reopen its factory there and keep it running, with thousands of workers sleeping on site to maintain partial production.

Whereas Shanghai is Tesla’s most productive plant, its factories in Germany and Austin, Texas, are only just getting going.

Musk staged an opening party at the former on March 22 and at the latter on April 7.

While those were jovial affairs -- Musk danced in Germany and donned a cowboy hat and shades in Texas -- the CEO sounded much more subdued a few weeks later.

“Berlin and Austin are losing billions of dollars right now because there is a ton of expense and hardly any output,” Musk told the Tesla Owners of Silicon Valley on May 31. “Getting Berlin and Austin functional and getting Shanghai back in the saddle fully are overwhelmingly our concern.”

The Shanghai shutdown and struggles ramping up new plants contributed to Tesla shares plunging 38 percent in the three months that ended in June, a record quarterly drop.

Tesla scheduled its quarterly earnings report for July 20.

Bloomberg contributed to this report