A Tesla sign is seen at its factory in Shanghai
A Tesla sign is seen at its factory in Shanghai, China, May 13, 2021. Reuters / ALY SONG

Tesla, the world's largest Electric Vehicle (EV) maker, is facing troubles at its China facility, one of the biggest for the U.S. EV giant anywhere, affecting its unanimous choice as the leader of global e-transport.

Its shares took a dive yet again on May 24 as the target to take production back to pre-lockdown levels at its Shanghai unit, which also caters to Tesla's European markets, is not moving smoothly due to the lockdown in China.

After seeing a spectacular rise, Tesla's share price has decreased by 42 percent and is at its lowest ever currently. Investors are skeptical about Tesla's prospects and its share prices were pegged at $1,145 on April 4, the day its CEO Elon Musk acquired a 9.2 percent stake in Twitter.

Since March, there have been curbs on the movement of people and goods in Shanghai due to the pandemic. Tesla is plagued with insufficient workers, shipping obstacles, and restricted availability of parts.

The shutdown has proved costly for Tesla, which sold only 1,512 EVs in China in April, down from 65,754 the previous month. Before the lockdown of the Shanghai plant, Tesla had run three shifts at the factory which makes its Model 3 and Model Y vehicles.

Tesla sold 1,512 battery-powered Model 3s and Ys in April, down 87 percent from a year ago, the China Passenger Car Association has said. It was Tesla's lowest sales volume in China after its Shanghai Gigafactory began producing cars in April 2020. Tesla has turned its Shanghai facility into a major source of production due to cheap labor costs.

Tesla is the only foreign brand among the top 10 automakers in the new energy vehicle (NEV) segment in China this year. The U.S. electric pioneer occupies the third slot, according to China Passenger Car Association data. But China is Tesla's second-largest market, accounting for 24.8 percent of its revenue.

With its current status as a $500 billion auto market, China is the world's biggest EV market. In the first four months of this year, pure EVs and plug-in hybrid passenger cars more than doubled from a year earlier to 1.49 million cars, according to data from the China Association of Automobile Manufacturers.

Since March the whole city of Shanghai has been affected due to the covid-19 lockdown. The supply and logistics of parts and components in the Yangtze River Delta have affected Shanghai's status as a hub in the national automobile industry.

However, after suspending operations from March 28 until April 17, production started at Tesla's Shanghai unit in late April with workers living inside the facility round the clock and holed up in a bio bubble due to the lockdown. Tesla is expected to remain in the closed-loop system till June 13.

Since the partial resumption of work under closed-loop control on April 19, 10,000 vehicles have been churned out till April 30. But Tesla aims to take the output to 2,600 units each day.

The Shanghai unit is expected to serve as Tesla's second global headquarters, and new models are expected to be rolled out from its stable in the future.

In the first four months of this year, Gigafactory delivered 183,686 vehicles, more than 1.7 times what it delivered for the same period last year.

The company is not planning to open new units in China but is betting big on its Shanghai factory by planning a major expansion spree.

Tesla opened an R&D innovation center at its Gigafactory in October 2021, despite a trade war between China and the U.S. in a wide range of areas. It showcased Tesla's positive attitude toward the Chinese market. In the long run, the company wants China to account for about 30 percent of its total market size.

The U.S.-based company has started R&D innovation center in Shanghai. The center will push further Tesla's localization process in China, by attracting local talent, and accelerating China's smart car R&D system, said Tesla China President Tom Zhu.

Tesla China is planning to open new supercharging stations in sixteen cities in China. New superchargers will come up in Shenyang, Beijing, Tianjin, Jinan, Jining, Yantai, Handan, Qingdao, Shangqiu, Chongquing, Kunming, Ngawa Tibetan and Qiang Autonomous Prefecture, Garze Tibetan Autonomous Prefecture, Yangzhou, Ningbo, and Zhoushan.

To help offset Tesla's challenges in China and to retain its current status as EV market leader, Tesla recently opened plants in Berlin and Austin.