Tesla shuts down Model 3 production line for 2 weeks amid chip shortage

– Feb. 25th 2021 5:57 am ET

Tesla is shutting down a Model 3 production line at the Fremont, California, factory for two weeks amid an industrywide microchip shortage.

According to a new report from Bloomberg, Tesla has informed employees from a Model 3 production line at the Fremont factory that their line is being shut down until March 7:

Workers on a Model 3 production line in Fremont were told their line would be down from Feb. 22 until March 7, said the person, who asked not to be identified because the information is private. Impacted staff were told they would be paid for Feb. 22 and Feb. 23 and not paid for Feb. 28, March 1, 2 and 3. They were advised to take vacation time, if they had it.

The employees in question weren’t informed of the reason behind the shutdown, which remains unconfirmed.

Unlike Model S and Model X production at the Fremont factory, Tesla is not making any significant update to the Model 3 program, which received a refresh late last year.

A component shortage could be explanation. Tesla’s vehicles are made of 10,000+ parts, some of them made in-house and others delivered by suppliers, and if one of them is in shortage, the car is not getting produced.

The entire auto industry is currently dealing with a global shortage of microchips.

The shortage has already resulted in many vehicle production lines behind halted around the world. GM, Ford, Nissan, Toyota, Volkswagen, Suburu, and Fiat Chrysler have all announced halted or decelerated production lines due to the issue.

Tesla had so far been able to avoid any impact on production due to the shortage, but its luck might have changed.

The electric automaker uses many computers and chips in its vehicles with the main one being its Full Self-Driving computer powered by a chip of its own design produced by Samsung.

With the cold weather resulting in frequent power outages in Texas last week, Samsung was forced to shut down its semiconductor plant in Austin, which likely affected Tesla’s chip supply.

In its 10-K filing with the SEC earlier this month, Tesla mentioned that they didn’t yet know how the microchip shortage is going to impact them:

For example, a global shortage of microchips has been reported since early 2021, and the impact to us is yet unknown. The unavailability of any component or supplier could result in production delays, idle manufacturing facilities, product design changes and loss of access to important technology and tools for producing and supporting our products. Moreover, significant increases in our production, such as for Model 3 and Model Y, or product design changes by us have required and may in the future require us to procure additional components in a short amount of time.

Tesla also produces Model Y at the Fremont factory and Model S and Model X, but the last two vehicles are currently being updated.

The automaker also produces Model 3 and Model Y vehicles out of its Gigafactory Shanghai in China.

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Tesla

Tesla is a transportation and energy company. It sells vehicles under its 'Tesla Motors' division and stationary battery pack for home, commercial and utility-scale projects under its 'Tesla Energy' division.

Tesla Model 3

The Tesla Model 3 is the first vehicle built on Tesla's third-generation platform. It aims to reduce the entry price for electric vehicles while not making any compromise on range and performance. The Model 3 starts at $35,000 in the US and deliveries to employees and company insiders began in mid 2017 – customer deliveries begin in late 2017.