Last month, as Shanghai’s citywide COVID lockdown showed no signs of abating, local authorities gave Tesla the green light to restart operations at its Shanghai gigafactory under a “closed-loop” system, where workers live on-site and avoid contact with those outside to avoid any COVID-related disruptions.
Staff were bused to the cavernous factory and reportedly provided sleeping bags and mattresses to camp down in. Tesla has no formal dorm facilities on-site, and in April the company was reportedly constructing shower areas for its closed-loop staff.
Tesla had hoped the system would enable it to produce 2,600 cars a day by mid-May, while most of Shanghai remained in lockdown. But on Tuesday, the electric-vehicle maker only churned out 200 units from its Shanghai factory bubble, reports Reuters.
The issue stunting Tesla’s productivity is that while the EV maker was able to deploy resources to get its staff into a closed-loop system, not every other factory in Shanghai could do the same. At least one of Tesla’s suppliers has shuttered its production facilities owing to the COVID outbreak, creating a parts shortage for Tesla that has left its closed-loop staff with little work to do.
Tesla has had to cut some shifts short after running out of parts, reports Bloomberg. Tesla did not immediately respond to Fortune’s request for comment.
Despite its factory being open for almost a month, Tesla was only able to make its first overseas shipment of cars on Wednesday, according to the Shanghai Observer, a government-backed news outlet. The manufacturer’s China sales plummeted in April, too, falling 98% from the previous month, according to data from the China Passenger Car Association (CPCA). By the end of April, Tesla had produced 10,757 cars, yet only sold 1,512 of them, according to the CPCA.
Tesla’s stuttering output is the latest example of how China’s COVID outbreak is snarling supply chains, even as Shanghai officials try to restart critical sectors of the economy while tightening restrictions on the rest of the city.
Shanghai is now in its seventh week of lockdown, with the city government on Monday imposing a two-day “static management order” that confined almost all residents to their homes and sharply curtailed the movement of medical workers and food delivery workers. The dramatic tightening of COVID restrictions comes as the central government piles pressure on local authorities to stamp out the virus completely. The city reported 1,487 COVID cases over the past 24 hours, the lowest total recorded in more than 18 days.
Even though some factories are able to open, Shanghai’s increasingly restrictive lockdown is preventing manufacturers from shipping goods out of the city. Shanghai’s port, despite running on a closed-loop system similar to Tesla’s, has struggled to load and unload cargo from container ships, hundreds of which are waiting off the coast. China’s logistics system has stalled as truckers are caught up in COVID restrictions and quarantines.
According to Fitch Ratings, freight traffic through Shanghai has plunged 80% from its level in late March. Shanghai is China’s largest port, and the congestion there contributed to a 5.3% drop in the country’s exports from March to April, Fitch noted.
“Much of this disruption, however, is yet to be reflected in hard global macro data,” Fitch Ratings said, warning that the fallout from Shanghai’s lockdown has yet to pass.
