Tesla, Volkswagen Keep Shanghai Workers Isolated Even as China Lockdown Eases

Tesla Inc. and Volkswagen AG plan to keep workers at their Shanghai factories isolated in so-called closed loop management systems until June 10, according to people familiar with the matter, even as authorities allow most residents to move freely around the city amid falling Covid-19 cases.  

Elon Musk’s electric-car maker told the more than 10,000 workers living in Tesla’s “factory bubble” to be prepared to stay in the system until June 10, according to the people, who asked not to be named because the plans are private. While movement restrictions are being lifted for residents in low-risk parts of Shanghai, the company wants to have a 10-day buffer to ensure production stability, they said. 

Tesla has gone to great lengths to resume production at the Shanghai plant, which was shut for about three weeks from late March because of the city’s Covid lockdown, costing it around 40,000 units of lost output. Workers brought in to bring the factory back up to speed have been housed in disused factories and an old military camp, with day-shift and night-shift workers sharing beds in makeshift dorms. 

VW’s Shanghai factory, operated with local partner SAIC Motor Corp., also told employees that it would keep its closed-loop system in place until June 10, according to an internal notice seen by Bloomberg News. All workers living on site have been asked to stay, while others should remain at home, the memo said. The company will gradually step up to full production between June 13 to June 30, it said. 

A representative for Tesla in China didn’t immediately respond to requests for comment. A spokesperson for VW said: “SAIC-VW is still under a closed-loop production system, and will further adjust production plans based on relevant policies,” without giving out a specific timeframe.

With Covid-19 cases easing, Shanghai is relaxing some of the strictest virus controls of the pandemic and moving to stimulate the country’s faltering economy. Residents in low-risks areas will be free to move around the city from June 1, and companies will no longer need to be on a “whitelist” to resume production. 

Tested Regularly

First used during the Beijing Winter Olympics as a way of keeping athletes and support staff separate from the wider population, closed loops, or factory bubbles, typically require workers to only go from on-site accommodation to the factory and back, and be tested regularly for Covid. The systems have been promoted by officials as a way to restart industry while limiting virus transmission. The toll on workers, however is significant, with staff constantly tested and separated from outside society.

China’s dogged adherence to stamping out the coronavirus at all costs has slowed everything from consumer spending to manufacturing in the world’s second-largest economy. 

Not a single car was sold in Shanghai last month and overall passenger vehicle sales in China tumbled 36% from a year ago to 1.06 million units, the biggest decline since March 2020, China Passenger Car Association data released earlier this month showed. 

The country cut the purchase tax on passenger cars by half as part of a raft of measures aimed at stimulating the economy.