Tesla to reduce staff by three quarters after Covid-19 county order

Tesla will reduce staff by 75 per cent at its Model 3 and Model Y production plant in Fremont, following clarification from the Alameda County Sheriff’s office that the electric vehicle manufacturer is not exempt from a “shelter-in-place” directive announced in response to Covid-19.

The lockdown directive, which was issued by six counties in the San Francisco Bay Area on Monday, requires people to stay at home, and only “essential” businesses to operate.

Tesla had originally told staff via email that the factory, which employs around 10,000 people, intended to stay open. There are less than two weeks left until the end of the first quarter for 2020 – a time when Tesla traditionally ramps up activity in order to boost production and delivery numbers.

“Tesla and our supplier network will continue operations that directly support factory production, vehicle deliveries and service,” Tesla’s US head of human resources Valerie Capers Workman told employees in an email seen by Bloomberg this week.

CEO and co-founder Elon Musk had assured staff via email that although Tesla intended to keep the plant open, if they felt ill they were not obligated to come to work.

Although it was reported by US media on Wednesday morning (US time) that Alameda County had indicated Tesla is an essential business, the county sheriff later that day tweeted, saying “Tesla is not an essential business as defined in the Alameda County Health Order. Tesla can maintain minimum basic operations per the Alameda County Health Order.”

A county spokesperson has now told Bloomberg that Tesla will reduce its operation in compliance with the order.

“We had a positive conversation, and it sounds like they are beginning to comply with the health order,” said Ray Kelly, the spokesman for the Alameda County Sheriff’s Office told Bloomberg.

“In war times, all automakers are considered vital national infrastructure, but this is a different era. This is a health pandemic.”

Other US car makers are also shutting down in the US to help contain the virus. Detroit’s “big three” will close this week with plans to reopen March 30 according to CNBC.

Fiat Chrysler has indefinitely closed a factory after a staff member tested positive for the virus, Nissan is suspending production from March 20 to April 6, Honda and Toyota are shutting next week according to the American Broadcasting Company.

Similar closures are taking place in the UK, with BMW, Honda and Toyota all suspending production according to the BBC.

The closures are putting pressure on an already besieged auto industry, which has been in flux with falling petrol and diesel sales while many undertake an expensive but ultimately necessary transition to electrification to reduce transport-related carbon emissions.

For Tesla as with other automakers though, a short lockdown will have a minor impact on quarterly reporting.

Tesla share values, responding to market uncertainty are now back to pre-2020 levels after a major rally that took off over January and February, down 16% from Tuesday after closing at $US361.22 ($A626.15) on Wednesday (US time).

Tesla in its Q4 2019 earnings call forecast that it would “comfortably exceed” 500,0000 units in 2020. With the production of its 1 millionth vehicle – a Model Y – on March 10, estimates have varied from 103,000 t0 116,000 for the first quarter.

Production numbers are not the main focus though for quarterly earnings – instead, Tesla tends to focus on deliveries which in turn it records as a sale. Weekly production estimates of Model 3 and Model Y at Fremont are around 8,400, not all of which would be delivered this quarter.

However even the lower end of estimates, with circa 8,000 less rolling off the factory floor could bring quarterly production under 100,000.

On both social media and in staff emails shared to media outlets, Musk called for calm saying he believes the panic over the highly contagious virus could be more dangerous than the virus itself.