(Bloomberg) -- Tesla Inc. plans to keep employees at its Shanghai factory working in a so-called closed loop system -- where staff are ferried to and from work and tested for Covid-19 regularly -- until mid-June, people familiar with the matter said, even as Chinese authorities move to ease wider lockdown restrictions in the city.

Thousands of the electric car maker’s workers have been sleeping on the floor of Tesla’s factory south of Shanghai doing 12-hour shifts, six days a week, to reboot production after a weeks-long pause because of the lockdown. Tesla wants to move those workers into a dormitory and keep them in a form of closed loop until June 13 at this stage, the people said, declining to be identified because the plans are private.

Tesla is also trying to start a second shift at the factory as soon as next week so that car production can resume operating around the clock once the supply of auto parts and other components becomes smoother, the people said.

Executives are now negotiating with Shanghai authorities over accommodation for workers on the existing and planned shifts, the people said. They could be housed in temporary dorms or vacant Covid isolation centers, according to one of the people. 

The company had hoped most workers could be bused from their own homes on door-to-door shuttles daily, but community-level officials vetoed the idea, saying that if people left their apartments, they wouldn’t be allowed back, the people said.

First used during the Beijing Olympics as a way of keeping athletes and support staff separate from the wider population, closed loops, or factory bubbles, typically require workers to only go from on-site accommodation to the factory and back, and be tested regularly for Covid. They’ve been used widely in Shanghai, enabling the financial and manufacturing hub to resume some production despite the ongoing virus restrictions. 

Read more about closed loops here

Representatives for Tesla China didn’t immediately respond to requests for comment.

Still Restricted

Shanghai is tentatively unraveling a punishing lockdown that confined millions of people to their homes for weeks amid signs that its outbreak is coming under control. The reality on the ground, however, is that many restrictions remain in place, with residents required to get special passes to leave their apartment blocks and many businesses, including restaurants, still shuttered. 

Read more: My First Day Out of Shanghai’s Lockdown Was Far From Freedom

With two shifts running 24 hours a day at its Shanghai factory -- Tesla’s only plant in China -- production may be able to ramp up closer to the around 2,100 cars a day the facility pushed out in normal times.

The factory is running at about 45% of capacity, a local government official said at a briefing earlier this week, adding that auto-parts suppliers in the surrounding area were also at around that level.

China’s dogged adherence to stamping out the coronavirus at all costs -- epitomized by Shanghai’s lockdown and restrictions imposed elsewhere in the country of 1.4 billion -- has slowed everything from consumer spending to manufacturing in the world’s second-largest economy. Industrial output and consumer spending slid to the worst levels in April since the pandemic began in early 2020. 

Why China Is Sticking With Its Covid Zero Strategy: QuickTake

Not a single car was sold in Shanghai last month and overall passenger vehicle sales in China tumbled 35.7% from a year ago to 1.06 million units, the biggest decline since March 2020, China Passenger Car Association data released earlier this month showed.

©2022 Bloomberg L.P.