Tesla Paused Model 3 Production With Only Partial Pay for Forced Time Off

While temporary, factory workers will receive reduced pay for time off.
Brad Bergan

Tesla has ordered a halt to production of Model 3 vehicles in its Fremont, California factory, according to an initial report from Bloomberg.

Tesla halts production of Model 3 vehicles with partial pay for forced time off

Tesla told its workers to stop production of the Model 3 in its Fremont, California factory — and a source familiar with plant's operations said Tesla gave no clear reason why production should pause, according to the Bloomberg report.

Executives at Tesla told line staff on the Model 3 production line that it would be paused from February 22 to March 7 — but the workers will only receive pay on some workdays. Specifically, workers were informed their pay would be for Feb. 22 to Feb. 23, but not for Feb. 28 through March 3.

As of writing, Tesla has not officially confirmed this pause in production, and no layoffs have occurred from this decision.

Tesla made record sales in 2020

Several possible reasons may explain Tesla's halt of Model 3 production in its California factory. Supply and demand can ebb and flow like a moody, unreliable tide — and Tesla could simply have a Model 3 surplus on its hands at the moment. The company could also be lacking crucial components to continue building the vehicles.

More worrying, however, is Tesla's reluctance to pay workers in full for the forced time off. In 2020, Tesla made more sales than ever before, putting the automaker on track to become the most valuable car manufacturer on the planet.

One theory on Tesla's temporarily halted Model 3 production involves the global shortage in semiconductors. The company's Q4 2020 earnings report in January stated its production was negatively affected by the paucity of semiconductors undergoing assembly globally, and this issue has had a far-reaching impact throughout the hardware and manufacturing industry.

In January, Tesla's CFO Zach Kirkhorn said the company was working "extremely hard" to deal with the impact of the semiconductor shortage. Other car manufacturers like General Motors and Volkswagen have already reduced production output for this season — which means Tesla is likely following suit.

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Tesla could see additional production pauses in 2021

Regardless of the cause, it's doesn't look great for Tesla not to pay for workers' forced time off. The company became the most valuable automaker in the world last year, and this status helped Elon Musk break through the billionaires on top of the world to spend at least some of this year as the richest person on Earth.

All to say you don't have to be an accredited economist to know that Tesla has more than enough money to support Model 3's production staff for a few days. The production workers voluntarily ceased production and went on vacation, yet taking vacation time during the unpaid interval is the only way they could receive funds.

Unfortunately, since 2021 is still embroiled in the coronavirus crisis — which means production issues will likely continue throughout hardware and production industries — Tesla may have additional pauses later this year. Time may tell what the real reasons are, and whether Tesla will pay its workers for forced time off.

This was a breaking story and was regularly updated as new information became available.

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