Tesla to slow down production at Shanghai plant due to supply issues

Elon Musk's Tesla Inc. has been forced to nearly halt production of its electric vehicles (EVs) at its Shanghai plant due to supply issues, Reuters reported. 

Shanghai is now into its sixth week of lockdown, following the rise in COVID cases. We had reported in March that the factory had been shut down and production halted in line with local regulations. The closure had continued for 22 days, and when the factory reopened on April 19, Tesla resumed production with nearly 1,200 cars per day, Reuters said in its report. An internal memo accessed by the media outlet shows that Tesla plans to roll out less than 200 cars per day.

Elon, the supply chain is clogged again

The news of the supply chain forcing a halt in production might sound like the first wave of the COVID-19 pandemic. However, even as the world tries to live with the virus, China has adopted a 'zero-COVID' policy and enforces strict lockdowns to contain the spread of the infection. 

The impact of these lockdowns is felt downstream in the supply chain, and while the Reuters report does not reveal the exact issue, a look around Tesla's activities and its CEO's tweets provide a good idea of what might be going on. 

Price of lithium has gone to insane levels! Tesla might actually have to get into the mining & refining directly at scale, unless costs improve.

There is no shortage of the element itself, as lithium is almost everywhere on Earth, but pace of extraction/refinement is slow.

— Elon Musk (@elonmusk) April 8, 2022

Extracting Lithium at pocket-friendly prices

In an unrelated report, Electrek said that while Tesla procures battery cells from suppliers, it also sources a large part of the materials directly from the mines. This is done to ensure that the sourcing is environment-friendly as well as socially responsible.  

Tesla said in an Impact Report that in 2021, the company sourced 95% of the lithium hydroxide, 50% of the cobalt, and more than 30% of the nickel used in its high-energy density cells.  However, skyrocketing prices of lithium are a major dampener in the plans for a company that has opened another of its Giga factory in Berlin recently. 

So, it wouldn't be a surprise if Tesla got involved in extracting lithium, at least for its own usage. After all, it has secured rights to mine the metal in Nevada. All it needs is to extract lithium at scale.