Tesla stock drops after hours as county says Fremont factory is not an 'essential business'

KEY POINTS

• An official tweet from the Alameda County Sheriff says that Tesla's Fremont, California, car factory is not an "essential business" and can only maintain "minimum basic operations."
• Under the county's order, those operations do not extend to manufacturing new cars.
• The sheriff's tweet contradicts what Tesla recently told employees about working during the coronavirus COVID-19 shelter-in-place order. 

Workers assemble cars on the line at Tesla's factory in Fremont.

David Butow | Corbis News | Getty Images

The Alameda County Sheriff's office said in an official tweet on Tuesday night that Tesla's Fremont car factory is not an "essential business" under the definition of its "shelter in place" order, implemented to slow the spread of the COVID-19 coronavirus:

tweet 1

This appears to mean that Elon Musk's electric vehicle and solar energy business will not be permitted to keep manufacturing and delivering new cars from its main U.S. car plant for the duration of the order, and contradicts what Tesla CEO Elon Musk and North America HR leader Valerie Workman told employees there as recently as Monday night. They wrote in e-mails that were sent to all employees that the car plant would stay open, and employees were expected to work if they were in production, service and delivery roles, or take unpaid leave if they had health concerns. 

Tesla stock was down 3.3% during regular trading on Tuesday, while most tech stocks were sharply up. It dropped another 5.3% after hours on the news.

The Fremont plant is the only car-making factory Tesla operates in the U.S., and is responsible for the bulk of Model 3 sedans delivered to U.S. customers. It is also the only place where Tesla manufactures its new Model Y crossover SUVs. Tesla makes a smaller amount of its Model 3s outside of the U.S. in its new Shanghai factory where COVID-19 forced a temporary closure as well.

Tesla may maintain "minimum basic operations" per the Alameda County Health Order, Sgt. Ray Kelly told CNBC. Here's how Alameda County Public Health Department defines minimum basic operations: 

For the purposes of this Order, "Minimum Basic Operations" include the following, provided that employees comply with Social Distancing Requirements as defined this Section, to the extent possible, while carrying out such operations:

i. The minimum necessary activities to maintain the value of the business's inventory, ensure security, process payroll and employee benefits, or for related functions.

ii. The minimum necessary activities to facilitate employees of the business being able to continue to work remotely from their residences.

"It was a hospital or laundromat, it could be business as usual," said Sgt. Kelly.