UPDATE: Tesla will halt production for coronavirus lockdown — but not until next week

A week after being warned it was not an 'essential business'

Tesla will suspend production at its California vehicle factory, the company announced Thursday — but it won't stop cranking out cars until next Tuesday, March 24, a week after being warned by the county sheriff's office that Tesla was not an "essential business" and was violating coronavirus lockdown orders intended to isolate spread of the pandemic in the San Francisco Bay Area. 

"Despite taking all known health precautions, continued operations in certain locations has caused challenges for our employees, their families and our suppliers," the company said in a statement. In an email to employees, Tesla said operations at the Fremont plant will transition to "minimum basic operations" beginning on March 24.

Tesla's shares were volatile following the announcement, dropping 9 percent in after-hours trading before regaining a portion of that.

Tesla's sole U.S. auto factory employs more than 10,000 workers, with annualized production of slightly more than 415,000 units by the end of December 2019.

Earlier, an Alameda County spokesperson said Tesla had reduced staffing levels, but perhaps not to the levels necessary to comply with the lockdown order.

"They told us they had gone from about 10,000 individual employees to about 2,500," he said. "It sounds to me like they very well could still be making cars. We are continuing to stress to them that they must move to minimum basic operations, if they are still making cars."

The spokesman said county officials needed to move on to more pressing issues regarding the virus rather than focus on Tesla. In other words, "Tesla needs to comply with the health order," he said, adding that the county did not want to force people into compliance, but implement changes with their consent.

In that vein, Tesla's ultimate decision to suspend production came after the company met with Fremont city officials. The city and officials from the surrounding Alameda County did not immediately respond to a request for comment on Thursday. Alameda County is one of six counties covered by an order from regional officials to "shelter in place," which limits activity, travel and business functions to only the most essential, and advises people to stay home except for the most crucial reasons.

Shortly after the "shelter in place" edict was issued, Tesla CEO Elon Musk sent an email to employees saying the plant would continue to operate but that workers who are concerned should feel free to stay home. The county sheriff's office on Tuesday afternoon said Tesla is not considered an essential business under that order and cannot continue to operate its factory normally.

Still, witnesses reported that there were still thousands of cars in the factory parking lot. Workers were seen entering and exiting the factory, there were food trucks onsite and a landscaping contractor rode a lawnmower around the grounds. The photo gallery above shows all the work going on at the plant on March 18, 2020.

The decision to suspend production at the plant comes as Tesla ramps up production of its Model Y sport utility vehicle at the factory, which Musk has said will see higher demand than all of Tesla's other models combined.

The automaker also said it believed it had enough liquidity to successfully navigate the extended period of uncertainty, with some $6.3 billion in cash at the end of the third quarter, ahead of a recent $2.3 billion capital raise.

The company said its New York solar roof tile factory will also temporarily suspend production, while operations at its Nevada Gigafactory will continue. Employees at the California and New York factories will be provided with paid leave during suspended operations, the email said.

Tesla's Gigafactory in Nevada, which employs around 7,000 people, produces battery packs for its electric vehicles and stationary storage systems.

The company's Buffalo, New York, plant produces the company's solar roof tiles as well as some Supercharger and energy storage components. It has more than 1,500 workers, the company said last month.

U.S. automakers Ford Motor Co, General Motors Co and Fiat Chrysler Automobiles NV, on Wednesday said they were shuttering their U.S. plants, as well as factories in Canada and Mexico, to stop the spread of coronavirus.

Reuters contributed to this report.

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