KEY POINTS

  • The Shanghai government recently ordered both government and private companies in the area to temporarily close operation
  • The move is for the government to strengthen the control and prevention of the new coronavirus
  • Tesla closing it's Gigafactory 3 in Shanghai could mean a possible delay in the production of both Model 3 and Model Y

The World Health Organization (WHO) declared on Friday that the coronavirus outbreak, which killed over 200 people in China, is now a worldwide emergency. Of the over 9,000 cases worldwide, the majority of which are in China, while the 100 cases are from 18 other countries around the world. On Monday, the Shanghai government ordered the shutdown of the government and private companies to strengthen the control and prevention of the new coronavirus.

Tesla is among these companies affected by the recent pronouncement of the Shanghai government since it's Gigafactory 3 is located in Shanghai. Other companies in the country are also temporarily closing their doors. The recent coronavirus outbreak in China and the temporary halt of operations could affect the production of Tesla Made In China Model 3 and Model Y in the country.

Tesla CFO Zach Kirkhorn said during the company’s recent earnings call on Wednesday that the stoppage could ‘slightly’ affect the profitability of the company. The US electric vehicle maker already started deliveries of its MIC Model 3 in China earlier this year. Tesla CEO Elon Musk also announced that the Gigafactory 3 in Shanghai would begin the production of Model Y in January.

According to the Shanghai government, companies can resume their operations on Feb. 9. Aside from Tesla, Toyota and several other automakers also announced that it would temporarily close its production facilities in the Asian country. Volkswagen, Ford, GM, and FCA have all restricted their employees from traveling to mainland China. 

Economists warned that the country’s growth could be affected because of the closing of automakers and tech groups’ factories in China. “The economic pain is currently being felt by businesses dependent on travel and tourism,” stated Mark Williams, chief Asia economist at Capital Economics, through Financial Times. He explained that the longer businesses and factories in China stay closed, the more production would be affected and would translate to suppliers and customers outside the country.

McDonald’s earlier closed hundreds of its restaurants with dozens of Uniqlo and H&M stores closing as well. Starbucks earlier disclosed that it closed nearly 50 percent of its 4,300 outlets in China. Airline companies have also temporarily banned travel to Wuhan and other parts of China due to the new coronavirus outbreak.