Workers at Elon Musk’s China factory for Tesla are working 12 hours and sleeping on site
In the Shanghai, China Tesla factory, staff have reportedly been working 12 hours daily and sleeping on-site. To the rest of the world, this is a big surprise. This is especially a surprise in countries like the US where the labor laws are strict. With the Chinese government pursuing the zero-COVID technique, this part of the country has been experiencing 6 weeks of lockdown. As a result, Tesla is experiencing total disruption in its manufacturing processes.
According to a Reuters report, the Gigafactory-3-plant is no longer working. According to Tesla, they didn’t get prior notice that the plant was ceasing operations. As such, some of their cars were still getting manufactured when they received the news.
Furthermore, according to an internal memo revealed to Reuters, Tesla is only going to manufacture less than 200 vehicles a day this year. This is a dramatic drop from the earlier target of manufacturing 1200 electric vehicles (EV) daily. Since the launch of this company in 2019, that has been their goal.
Factory shutdown at the end of March
Due to the rapid spread of COVID-19, the factory was shut down at the end of March. This was an attempt to help contain the spread of COVID-19. During this period, the country was dealing with a new COVID variant, the Omicron variant.
1) Resuming function
In April, the company was allowed to resume operations. However, they could only do so under the closed-loop system. As part of the closed-loop system, the employees of the company were required to reside on-site and get tested regularly. This system is designed to curb the spread of the virus within the company. It’s also built to prevent the spread of the virus among outdoor staff. Thanks to this new system, the company operations were taken back online.
Before this lockdown, the employees had three shifts a day, and seven days a week. That’s according to a Bloomberg report. In the closed loop system, that has changed. The new system means the employees have to work 12 hours per day according to reports by Bloomberg. Instead of 7 days weekly, they now work for 6. Unfortunately, Tesla’s spokesman wasn’t available to comment on this when Fortune reached out.
Before the closed-loop system was implemented, all the employees at the factory were notified through a memo. Within the memo, there were key details on what they should expect. And that time, the company also added that every employee would receive a mattress. Since there’s no dorm, each employee would have to sleep on the floor.
A certain section of the factory was to be turned into a dining, showering, and entertainment area. All of this was outlined in the Tesla memo.
Until lately, Tesla production was primarily reliant on Shanghai and California factories. To keep up with the demand, the US carmaker set up more factories in Texas and Berlin. The Texas branch has since become the company’s headquarters.
Employees working long shifts and living on-site at the company is not something new. Nor was it strange when Tesla announced the change. That’s because all the companies within the city were using the system to keep operating. The city’s stringent measures and the encouragement by the local authorities led to the adaption of this mechanism in various companies. Companies were left with two choices – either adopt the closed-loop system or close their business until COVID-19 goes down or ends.
Over 20k traders and bankers in Shanghai were also adapting this technique. In fact, most of them were living in their offices. The financial service sector was also adopting the same closed-looped system.
Meantime, the world’s largest business seaport, the Shanghai Port maintained 24 hours operations using the same system. As such, the policy worked for them as well.
Furthermore, during the beginning of the lockdowns in late March, companies like General Motors encouraged the same policy in their factories. Their employees would sleep on the floor to sustain production in the factory. Employees in the Volkswagen factory received the same treatment. They would even get movie nights for entertainment. However, the spokesmen of these companies were not available to comment on this.
Musk’s keynote speech
As mentioned earlier in the text, there was a memo to all employees about the new working schedule. Therefore, each one of them had the option of sticking around or going home. During Elon Musk’s keynote speech in early May, he commended his staff’s efforts at the Shanghai factory. He applauded them for working under conditions that go against the labor law in China and other countries.
The highest praise was reserved for those who were going above and beyond to meet the production dates at the Gigafactory. In the same speech, Musk went on to compare China’s and America’s workforce. For starters, the Chinese workforce invests all their efforts into the company. On the other hand, their American counterparts lack the qualities he considers vital for company productivity.
Beyond Tesla, VW is also achieving growth in spite of the pandemic. While VW is an established brand, it can be viewed as a startup from an electric vehicle perspective. However, VW is investing the most in electric vehicles.
Musk has predicted that many powerful companies will emerge from China because the people here have great talents and are known for being hardworking. Furthermore, more people are interested in manufacturing here. They will burn the midnight oil without complaints. As such, they won’t have any problems with living on the factory floor. On the other hand, in America, such a policy is hard to implement.
According to Musk’s speech, it sounds like what people are claiming is true. Thanks to their work ethic, Chinese workers are making it possible for Tesla to achieve their targets. As a company, they’re able to meet their production goals thanks to these talented and hardworking employees.
Given that the Chinese have an extreme working culture it’s beyond possible for manufacturing companies with branches in China to meet their production goal. In other words, Musk isn’t disregarding any labor rule; he’s just maximizing their working culture.
During the city lockdown, the workers at the Tesla factory had 12-hour shifts. They would also work six days a week. At night, they would sleep on the floor, especially during the most recent lockdown. If you were counting the total hours in a week, this adds up to 72 hours.
Previously, Musk has boasted about working120-hour weeks. If you compare the Chinese working hours to the hours Tesla workers are putting in, it’s relatively reasonable, especially by Musk’s standards. And yet, since the maximum working hours for a Chinese worker is 48 hours (including overtime) you will find numerous reports claiming safety and labor rights violations since 2018.
The Tesla Chinese factory manufactures more cars, Musk says
During the annual shareholder meeting, Elon Musk mentioned that the China factory is doing better than all the other factories. It’s even outperforming the factories in California and Fremont. However, he didn’t specify how many vehicles they were producing. On the other hand, he did say that the quality of service is great considering that the cost of production is low.
Even so, the effort to expand the Fremont factory operations is still on. The ultimate goal is to boost production in this factory by 50%. Despite the remarkable rate of vehicle production, Tesla’s sales plummeted by 27% from March to April. That’s because the carmaker became a popular target of the state media and the Chinese government.
For example, the company had to recall over 250k vehicles in June after a regulator claimed that the Autopilot button is in a poor position. As such, the diver can press it accidentally, leading to an accident.
While Tesla’s local China Shipments went down by nearly 70% between June and July, exports from the China factory multiplied five times to 24, 347 EVs. This is according to a Bloomberg report. During a virtual conference, Musk mentioned that Tesla will proceed with the expansion of its R&D venture in China.
Aside from the China factory, Tesla is opening up more factories in Texas, Austin, Germany, and Berlin.
The COVID surge and what it means for Tesla
According to analysts, sustaining Tesla’s 33% gross profit margin from the first quarter will be challenging. That’s because of the rising cost of commodities. It’s bound to be even harder due to the Shanghai lockdown. Due to these uncertainties among others, the value of Tesla shares has dropped since January.
Thanks to the easing of COVID restrictions, Tesla managed to boost the company’s performance close to its previous target before the lockdown. According to a Reuters report, the lockdown halted manufacturing processes for 22 days.
Previously, Tesla had a daily target of 2500 units by mid-May. However, they were unable to achieve this goal. After the lockdown, the company began operating using the closed-loop mechanism to salvage the days that had gone to waste. They were now aiming at manufacturing 17k cars weekly by 13th June.
Which Tesla models are manufactured in the Chinese factory?
The plant in Shanghai solely deals with Model Ys and Model 3s. These vehicles are mainly built for the domestic market in China. Nevertheless, they also export them to Australia and Europe. In the previous year, about half of over 900k EVs Tesla manufactured were China-made. This is according to China Passenger Car Association data.
As of now, you can receive Model 3s in Australia between 9 and 12 months from the day you place your order. However, if you are residing in Europe, then you can get it in less than 8 months. That’s according to their official site. If you’re a buyer in China, the longest recorded waiting time is 24 weeks. However, you can easily receive your car after 10 weeks. This data is also from their official site.
Like many other businesses, Tesla has been hit hard by the impact of sustained lockdowns in China. These seemingly endless lockdowns have not only led to the shortage of labor but also materials. As such, the company had to cease its operation for nearly a month. Fortunately, the government mitigated the situation by introducing the closed-loop system. This system would keep the employees within the factory walls to prevent the spread of COVID.
This also means their normal working hours have had to change. The new schedule is 12 hours of working per day and six days per week. Due to this schedule change, Tesla has experienced a rapid production rate.
As you can see from this Tesla story, you’re bound to face opposing forces when you launch and establish your startup. Whatever the reason for group activism against your venture, you should know how to respond accordingly. A good example is this controversy surrounding the working ethics at Tesla’s China factory.
With the right response, you can mitigate the impact of the activists, especially if you approach the situation with tact. For instance, Musk delivered a smooth keynote speech. In this speech, he outlined the need for the closed-loop system and commended the Chinese staff for going above and beyond to make sure Tesla continued to meet its production goals. He also reminded the people and the media about the working culture of the Chinese workforce.
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