The key to Tesla, Inc. (NASDAQ: TSLA) hitting its sales target for the year is the speedy ramp of Giga Shanghai, which faced disruptions from COVID-19 lockdowns in China. It now appears the company may take longer than previously expected to return to business as usual.
What Happened: Significant improvement in production activity at Giga Shanghai is unlikely until June, prominent analyst Ming-Chi Kuo of TFI Securities said in a series of tweets. This could mean a slower ramp than the mid-May timeline, as reported by several media outlets.
The view is based on consensus opinions from different industries, the analyst said.
He noted that after reopening on April 18, Giga Shanghai has been grappling with unstable production, pointing to challenges in the supply chain and logistics.
Tesla has reportedly halted production at Giga Shanghai due to supply issues. Kuo said this would be temporary and the company hasn't yet moved orders from its Shanghai plant to other factories since the lockdown began.
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Why It's Important: Production disruptions are taking a toll on Tesla's China performance, as was evident from April's anemic sales. The company on April 18 emerged from a three-week shutdown and began operating under a "closed-loop system."
Tesla CEO Elon Musk, however, has downplayed these concerns and said China would account for roughly 25%-30% of Tesla's overall market. He said that there would be no new factory coming up near the existing one in Shanghai, but instead, there would be a capacity boost.
Price Action: Tesla shares closed Tuesday's session up 1.64% at $800.04, according to BenzingaPro data.
Related Link: Tesla April China Sales Hit Rock Bottom, Underperform Industry: What Investors Should Know
