Musk forced to halt Tesla assembly line in struggling Berlin plant for 2 weeks over production problems

German tabloid Bild reported on Monday the factory has been struggling with a trio of persistent problems: longer-than-anticipated manufacturing time, a lack of skilled workers, and quality assurance issues that require expensive reworking on vehicles that have already rolled off the assembly line. 

Last month the plant managed to achieve 1,000 vehicles built per week, only about a tenth of what the factory can produce once it hits full capacity. It began manufacturing in late March after receiving final regulatory approval.

According to local media, output should resume later in July at a faster pace once modifications to improve productivity at workstations are completed. The plant is expected to then move from a two-shift operation to three, running around the clock. 

The temporary halt is unrelated to recent news that Germany’s automotive regulator called on Tesla to issue a safety recall for more than 59,000 Teslas worldwide due to a technical problem in the cars’ emergency system. 

The temporary drop in production at its Giga Berlin-Brandenburg site comes at a sensitive time, as CEO Elon Musk recently branded the plant a “gigantic money furnace” that is currently costing the company billions. 

Adding to investor concerns, the eccentric billionaire also took an unusual 10-day holiday from posting on Twitter, sparking fears his lawyers may have instructed it ahead of a potential regulatory disclosure. 

China headwinds

Tesla did post quarterly volumes on Saturday that revealed car sales fell for the first time since the Model Y was launched at the start of 2020. 

The 254,700 vehicles delivered lagged expectations that had already been revised lower, snapping a streak in which Tesla consistently surprised to the upside. 

The drop was due to Chinese health authorities throttling production at its Shanghai plant for weeks to combat a local outbreak of COVID. 

In its statement, the company sought to soothe shareholders nursing heavy portfolio declines, saying that production had hit a record monthly high in June. This would suggest a level of around 105,000 vehicles or more, besting the level from December. 

Musk has repeatedly reaffirmed Tesla would grow 2022 volumes by more than 50% over the 936,000 sold last year—a target crucial to its high valuation compared to rival automakers. However, thus far it has only some 565,000 under its belt, leaving more than 800,000 still to be delivered during the second half of the year. 

Some investors and analysts fear that when the company announces second-quarter results on July 20 it will post a drop in earnings compared to the first quarter. Should there be a clear dent in margins, the report could indirectly confirm analysts’ suspicions that its Shanghai factory is easily the most profitable and efficient of Tesla’s four assembly plants worldwide, thanks to low wages and high productivity.

Shares in the company have fallen 35% since the start of this year, a steeper decline than the 29% drop in the broader tech-heavy Nasdaq. Tesla officially disbanded its public relations team two years ago and no longer responds to press inquiries for comment.