Tesla to Reopen Gigafactory Shanghai with ‘Closed-Loop’ Output System: Report

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Tesla is gearing up to reopen its Chinese Gigafactory in Shanghai. The electric vehicle (EV) maker has started calling workers back to the factory and on Friday notified some employees to enter a so-called “closed-loop” production system starting April 17 — reports Bloomberg.

The news is in line with recent reports of Tesla receiving a green light from local authorities to restart production at Giga Shanghai next week on Monday, April 18.

A closed-loop system is where factory workers live on-site and are regularly tested for the COVID-19. To bypass the current lockdown in Shanghai, Tesla will also issue a special certificate to workers on call and arrange shuttle buses to bring them back to the plant, according to a source familiar with the matter.

Production at Tesla’s Chinese Gigafactory in Shanghai has been suspended since March 28 due to lockdowns imposed by the local government to curb China’s largest COVID-19 outbreak in two years.

Assembly lines at Giga Shanghai have now been idle for 22 days (including another 2-day pause from mid-March), and plans to reopen have been repeatedly delayed. At a run rate of about 2,100 cars a day, Tesla has lost out on about 46,200 units as a result.

Plans to reopen will still be vulnerable to changes in the Chinese government’s COVID-19 prevention policy. Even when Giga Shanghai does start operations back up, it will take a while for Tesla to ramp production back up to pre-closure numbers with only a fraction of workers coming back.

Only some of the employees have been arranged back in the first “closed-loop,” which is expected to run from 10 to 20 days, according to an internal survey reviewed by Bloomberg. The eventual start requires the coordination of workers, equipment maintenance, suppliers and logistics.

Giga Shanghai relies on suppliers across China and there are varying COVID-19 prevention measures in place across the country at this time, so actual production capacity will also depend on “the supply of components Tesla can get,” said Junheng Li, an analyst at JL Warren.

In a statement released on Friday, China’s Ministry of Industry and Information Technology (MIIT) vowed to push forward production resumption at major factories in Shanghai to alleviate the strain on global supply chains.

He Xiaopeng, CEO of Chinese EV startup Xpeng Inc., previously warned of the potential losses protracted lockdowns could bring to the state economy and key industries. “If supply chain companies could not find a way to resume operation and production, it’s likely all automakers in China may have to suspend production in May,” he said.

SAIC Corp., another Shanghai-based automaker, is also preparing strategies to restart production soon.

SAIC “is not going to resume production as early as Monday, but is doing some preparation work among suppliers, logistics, and the whole-vehicle production,” a spokesman said. “Pandemic prevention is still our first priority, and once our preparation work is done, we’ll start to gradually resume production.”

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