Tesla Fremont Factory Closes
Recently, California based automaker, Tesla, announced that it would suspend production at its Fremont factory beginning March 23rd.
Tesla said the following in a statement:
“We have followed and are continuing to follow all legal directions and safety guidelines with respect to the operations of our facilities, and have honored the Federal Government’s direction to continue operating. Despite taking all known health precautions, continued operations in certain locations has caused challenges for our employees, their families and our suppliers.”
Over the past few weeks, Musk has been quite dismissive of the virus, stating that the ‘Coronavirus panic is dumb’ and that workers can ‘go home if they want to’.
In addition to the closure of the Fremont Factory, Tesla has also closed the Gigafactory in New York. It is worth noting that the Nevada Gigafactory which produces Tesla’s battery packs and powertrains has remained open for now. Despite this, Panasonic has pulled the vast majority of its workers from the factory.
Furthermore, Tesla is still operating for ‘essential purposes’. For example, maintaining critical supply chains and service infrastructure.
To help curb the spread of the virus, Tesla will offer ‘touchless deliveries’. This means that a prospective owner will be able to unlock their car on their phone in a delivery car park. They can then sign the paperwork that is inside and hand it into an off-site point.
Should Investors be Worried about Fremont?
In short, it does not appear as though Tesla investors should be worried.
In February 2020, when Tesla stock was over $800 per share, Musk made the executive decision to complete a $2 billion cash raise. Although the reason for doing this was not Coronavirus related, it will certainly help Tesla through these difficult times.
Due, in part to their capital raise and having multiple new lines of credit, Tesla has plenty of cash onboard to make it through this recession, even if it lasts a couple of years. Estimates suggest that Tesla will burn around $60 million per week from operating expenses with both the Fremont and Buffalo factories closed.
This would equate to around $270 million per month or $5.475 billion per quarter. Most analysts reckon that Tesla could weather closure of the Fremont factory without issue.
Other automakers have ceased the production of vehicles, many of which aren’t as financially healthy as Tesla. For example, most US automakers like Ford and GM have had decreasing share prices since early last decade.
In comparison to these other automakers, many believe that Tesla’s cash position is significantly better. If anyone goes bankrupt, Tesla will almost certainly not be the first one.
Although the stock price has fallen to just over $400 per share, down from $800 per share earlier this year, there doesn’t seem to be anything to worry about right now.
Musk Helping with the Production of Ventilators
When a COVID-19 patient is admitted to a critical care unit, the reason is usually respiratory. If the virus infects the lungs, the patient can be left unable to breathe. To keep them alive, intensive care units (ICU) use ventilators. Essentially, ventilators breath for the patient that is attached to them.
Usually, respirators aren’t in high demand, respiratory problems usually occur at a reasonably constant rate. However, with the spike of a global pandemic like Coronavirus, which demands such specialist equipment, there is suddenly a shortage of them.
Part of the reason Italy is experiencing so many deaths is their lack of ventilators. By contrast, Germany has a strong supply of ventilators, decreasing its death rate.
The prime minister of the United Kingdom, Boris Johnson, called for a warlike effort for manufacturers to start producing ventilators as fast as possible for the NHS. A similar shortage is hampering progress in the United States.
How is Musk Helping?
To combat this, Elon Musk has suggested that one of his companies could start manufacturing ventilators. Musk mentioned on Twitter that the production of ventilators should not be too difficult given the technical expertise of the team at Tesla and SpaceX.
Despite this effort, ventilator manufacturers seem to be slightly less convinced. Many believe that making ventilators will be harder than Musk is making them out to be. Furthermore, ventilators are needed in the short term, and setting up large production lines for them is a difficult task to achieve with such little time.
Musk has agreed to start working on producing ventilators, though it is not yet known at which company. Furthermore, he has stated that he doesn’t think that they will be needed. This is probably because, by the time he has started producing them, the demand will be satisfied.
If the shortage of ventilators is anything like that in the UK, he shouldn’t have any issue selling them. Boris Johnson has stated that the NHS will buy as many ventilators as manufacturers can make, essentially guaranteeing them sales.
As Musk stated in a tweet, either Tesla’s HEPA and filtration engineers or SpaceX’s life support engineers for the Dragon Capsule could be used to produce ventilators. In the end, it could be a mixture of both teams.
That’s all for Tesla Weekly this week. Since Tesla as a company has almost come to a standstill, there’s not much to report on this week. If there’s very little to report on in the coming weeks, Tesla Weekly may temporarily stop, though it will be replaced by topical articles on electric cars and sustainable energy.