TSLA Tesla Inc

By Tim Higgins 

Tesla Inc. shares plummeted Wednesday after the sheriff's office in the county home to the company's California car factory said the auto maker must halt production, putting a break on CEO Elon Musk's plans to work in spite of statewide efforts to mitigate the effects of the novel coronavirus pandemic.

The Silicon Valley auto maker had continued to make vehicles at its Fremont factory a day after counties in the San Francisco area issued an order to shut down nonessential business to get people to shelter at their homes.

Instead of continuing production, the auto maker must conduct "minimum basic operation only," Alameda County Sheriff spokesman Raymond Kelly said in an email sent to The Wall Street Journal on Tuesday.

His email followed a tweet by the sheriff's office declaring Tesla as "not an essential business as defined" in the order.

The factory, as of midmorning Wednesday, continued operating.

Tesla shares fell more than 16% Wednesday, outpacing broader market declines. The drop was one of the worst one-day performances for the stock. Tesla shares had already retreated more than 50% from its February high amid growing investor concerns about the impact of the Covid-19 outbreak on businesses. The Nasdaq was off almost 30% over that period.

The directive could threaten Tesla's plan to boost deliveries by more than 36% this year, fueled in part by a new factory in China and the arrival of the Model Y compact sport-utility vehicle. On Monday, Tesla announced deliveries had begun of the Model Y, which is being made in Fremont.

In an email to employees Monday, Mr. Musk said the harm from the panic over the novel coronavirus is more dangerous than the actual disease.

Still, he wrote, "I'd like to be super clear that if you feel the slightest bit ill or even uncomfortable, please do not feel obligated to come to work."

"I will personally be at work, but that's just me," he added. "Totally ok if you want to stay home for any reason."

For Tesla, managing the public health crisis has become a tale of two factories. When the novel coronavirus threatened China earlier this year, the auto maker had to close its new Shanghai factory as part of an effort there to contain Covid-19.

The directive issued by the local sheriff Tuesday came about 24 hours after an Alameda County public health department spokeswoman said the Fremont factory wouldn't have to shut.

Under the terms of the order, minimum basic operations cover only such work needed to maintain the value of a business's inventory, ensure security, process payroll and employee benefits, facilitate remote working or "related functions."

Tesla didn't respond to requests for comment on the company's plans.

Tesla's decision to stay open has drawn scrutiny, including from Robert Reich, the former secretary of Labor under the Clinton administration. "Food might be essential, but not Teslas," he said on Twitter. "Subjecting 10,000 workers to this pandemic is shameful."

Other U.S. auto makers are also facing pressure to follow the lead of European factories and shut down amid the health scare.

While Tesla's cash pile was strengthened in recent weeks with the issuance of more than $2 billion in new shares, a prolonged shutdown could still threaten Tesla.

Morgan Stanley estimates Tesla has enough cash to weather revenue falling 90% for a full three months. In such a case, the bank estimates, Tesla would burn about $800 million in cash a month. According to its estimates, Tesla has about 14 months of cash it could burn through.

Ian Lovett contributed to this article.

Write to Tim Higgins at Tim.Higgins@WSJ.com

(END) Dow Jones Newswires

March 18, 2020 17:40 ET (21:40 GMT)

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