Red carpet treatment in China has not spared Tesla from the effects of country-wide factory shutdowns as fallout from the coronavirus epidemic grinds on. The company said Tuesday that it is delaying the deliveries of its highly anticipated China-made Model 3 vehicles, but is working to keep up with its schedule.

Why it matters: Tesla has been trying to downplay the potential hit to sales from the current novel coronavirus outbreak, but there is growing uncertainty about how it will weather the impact of the epidemic that has had catastrophic effects on local businesses, particularly already-troubled electric vehicle (EV) makers.

  • The announcement about the delay triggered a sizeable sell-off as Tesla’s share price fell 17% to $734.7 on Wednesday.

Details: Tesla will push back deliveries for its China-made Model 3, which was initially scheduled for early February, Tao Lin, Tesla vice president, said Tuesday on Chinese microblogging platform Weibo.

  • In response to the question of whether the delivery in the second quarter will be delayed another three months, Tao said the company is making plans to “keep up with the timetable” once the virus outbreak winds down, but did not disclose further details.
  • Lixiang, a Chinese EV maker backed by Meituan founder Wang Xing, has delayed the delivery of its first mass production model Leading Ideal One, originally scheduled for February and March.
  • In an announcement (in Chinese) sent to users earlier this month, Lixiang said it hopes to reschedule the delivery date in a month as it works to recoup widespread impact on the domestic supply chain.
  • Lixiang said that more than 10% of its components are supplied by manufacturers in Hubei province, the area hardest hit by the outbreak.
  • A major component hub for the auto industry, Hubei has drawn a bunch of global Tier-1 suppliers, including Bosch, Valeo, Delphi, and Aptiv, which all have production bases located in the province.
  • Bosch CEO Volkmar Denner late last month warned of a hit to the industry from the outbreak, saying the global supply chains “will be disrupted” if things continue as they are, according to a Reuters report.

Context: Tesla expects that the Shanghai Gigafactory will resume production on Feb. 10, in line the with a schedule set out by the Chinese government.

  • During its fourth-quarter earnings call last month, the company was forecasting a delay of up to a week and a half for production of the domestically made Model 3.
  • Tesla CFO Zach Kirkhorn assured investors that the closure will have a modest impact on first quarter profitability, as profit contribution from the Chinese-made Model 3 remains in the early stages.
  • Automakers including Toyota, Honda, and Nio have yet to reveal a schedule to resume production.

Tesla kicks off trial production in Shanghai, surprises with Q3 profits

Jill Shen is Shanghai-based technology reporter. She covers Chinese mobility, autonomous vehicles, and electric vehicles. Connect with her via e-mail: jill.shen@technode.com More by Jill Shen

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