Famous car brand Tesla has announced that it will halt some production at its car assembly plant in California temporarily. The workers on Tesla Model 3 production line in Fremont, California, were informed that their line would be put on pause from Feb. 22 until Mar. 7.

Tesla halts production of Model 3

According to a report done by Bloomberg, the announcement came suddenly, but no clear reason was stated as to why the management decided to put the production on hold for two weeks, and Tesla refused to comment on the matter.

The report also did not state how much revenue or volume the company would lose because of the production halt. The plant in Fremont has a yearly production capacity of 500,000 Model 3s and Model Ys.

However, many pointed out that Tesla stated in January that the company might face a temporary impact from a global semiconductor shortage, according to Reuters.

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Several auto-making companies, including Volkswagen AG, General Motors Co., and Ford Motor Co., are affected by the shortage of semiconductors, forcing them to decrease the number of vehicle production.

The impacted staff were told that they would still be paid for the dates Feb. 22 and 23, but they will not be paid for Feb. 28 to Mar. 3. They were encouraged to use their vacation leave during the unpaid dates if they still have it.

Last month, Tesla stated that they are trying to mitigate the effects of the semiconductor shortage on its operations and that the company expects to increase car deliveries around the world by 50% in 2021.

Hitting their target delivery goal is very important for Tesla in order for Elon Musk, the company's CEO, to meet his goal of 20 million cars sold by 2030.

Tesla has cut its models' total price numerous times in different markets such as Japan, China, and France this year, making people speculate that the company is not hitting its desired volumes.

GLJ Research LLC founder Gordon Johnson wrote that when considering Tesla had excess inventory in the fourth quarter of this year, and has never been able to sell-out their production capacity, it is evident that Tesla has demand constrained instead of production constrained.

Semiconductor shortage

Consulting firm AlixPartners predicts that the global auto industry may lose up to $60.6 billion in revenue in 2021 due to the shortage in semiconductors--auto makers rely on for a multitude of purposes, including the engine control units which runs the internal combustion engine, the instrument clusters, the MEMS accelerometers and the infotainment systems, brakes and power steering.

Semiconductor chips are also important in other gadgets such as iPhones, personal computers, game consoles and electric vehicles, and more.

The semiconductor shortage is caused by the sudden large demand in 2020 for new Smart TVs, personal computers, consumer electronics, laptops, and computer games from millions of customers around the world who were forced to stay at home during the height of the coronavirus pandemic.

The pandemic has also forced chip production facilities to shut down in Taiwan and China, the two dominant semiconductor chip producing nations, and it affected the supply.

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Written by Sieeka Khan

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