Tesla Extends Production Halt at Shanghai Plant. It’s a Blessing In Disguise.

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Tesla

will extend the suspension ofproduction at its Shanghai factory through at least Friday because of the city’s Covid lockdown, said reports from Bloomberg and Reuters.

Lower production isn’t really a good thing, but in this case it might not hurt investors in Tesla (ticker: (TSLA) ).

The suspension began Monday and was expected to run through Thursday following a city-wide surge in Covid cases that prompted officials to implement sweeping restrictions.

The lockdown of the eastern half of Shanghai was supposed to be lifted early on Friday, April 1. But according to Reuters, the lockdown is now expected to end Saturday, April 2. Reuters cited an internal notice that it had seen. Tesla didn’t immediately respond to a request for comment about the extended production delays.

The Tesla factory is in the eastern part of the city.

The Shanghai facility is a key plant providing cars for the domestic Chinese market as well as exports to Europe, including Germany. The plant shut for a couple of days earlier in March because of parts shortages.

The halt, coming at the end of the first quarter, has the potential to impact first-quarter deliveries. Tesla is expected to deliver between 310,000 and 320,000 vehicles in the first quarter of 2022, up from about 309,000 deliveries in the fourth quarter of 2021.

Estimates have been fluctuating in the final days of March as analysts try to weigh the impact of shortages against demand information gleaned from vehicle registrations and Tesla app downloads — which can give some indication of how many customers receive their Tesla vehicles.

Earlier this week, RBC analyst Joseph Spak raised his delivery estimate about 3% to more than 325,000 units. But New Street Research analyst Pierre Ferragu and Credit Suisse analyst Dan Levy believe that deliveries will be closer to 310,000, partly because of the new Chinese Covid restrictions.

It is proving a more difficult quarter than usual to try to pinpoint Tesla deliveries. Overall, analysts’ delivery estimates have come in by a few thousand units over the past few days. The falling delivery estimates haven’t hurt the stock though. Coming into Thursday trading, shares have gained 8% for the week and are up about 26% for March.

It feels as if the market is almost treating the Covid restrictions as a blessing in disguise. That makes some sense. The restrictions could lower the delivery number required to keep Tesla stock momentum high. A week ago, investors probably wanted to see something like Spak’s 325,000 figure delivered. Now something closer to 315,000 likely will be deemed OK.

Of course, production will need to resume shortly. Analysts and investors don’t want to be cutting full-year delivery estimates. But the timing of the Shanghai delays don’t seem to be vexing anyone.

Tesla was rising 0.6% to $1,100 in premarket trading.

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Write to Joe Woelfel at [email protected]