Tesla (TSLA) has reportedly halted production of its Model 3 sedan in the Fremont, California, factory amid a worldwide shortage of chips hitting the automotive industry. Tesla stock fell.
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Staff of the Model 3 production line said their line would be vacant from February 22 to March 7, sources told Bloomberg News.
Tesla will pay staff for February 22 and February 23, but not for February 28, March 1, 2 and 3. Instead, they are advised to take vacation time, if possible.
The report did not specify why Tesla interrupted, but the continuing global shortage of chips was possibly one of the reasons. The winter storm in Texas last week that shut down the Samsung factory in Austin could further affect the supply of chips.
Although it is unclear whether Samsung currently supplies Tesla with chips, in the past it was a customer. And the two announced a partnership last January to produce a new 5-nanometer chip for full self-steering, according to Electrek.
Wedbush analyst Daniel Ives said the shutdown was “more about the shortage of chips (and not demand), which continues to plague GM and other automakers in the short term.”
He added that based on his analysis, there is still some supply of Model 3s from the fourth quarter in the Fremont premises and that he is “not too worried that this supply chain / factory disruption will affect the overall delivery trajectory for Q1 and 2021. does not change. “
It is not known how much production will be lost due to the temporary closure. The Fremont plant can produce 600,000 vehicles a year. Tesla, which delivered nearly 500,000 vehicles worldwide last year, said it would increase delivery by more than 50% this year.
In 2020, Tesla closed the Fremont factory for the holidays, from December 24 to January 11. Tesla paid a full week at the time, along with a few paid holidays. Employees were also asked to take five days unpaid unless they preferred to find work in other parts of the factory.
Tesla also manufactures Model 3s at its China plant, but the Fremont plant has the largest capacity.
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Tesla Stock
The stock fell 3.6% today to 715.60. IBD Leaderboard shares Tesla is strongly below the moving average of 50 days after giving up the 800 level, according to the MarketSmith chart analysis. If two sell signals are activated, investors should consider making a profit.
Tesla’s share has dropped its relative strength downward over the past few weeks. Its RS rating is a solid 96 out of a possible 99, while the EPS rating is 76.
Tesla is not the only carmaker to deal with a shortage of chips recently. General Motors extended the standstill at three events from early February to more than a month until mid-March.
In January, Ford closed a plant in Louisville, Ky., Due to the shortage of chips. The company said at the time that the closure was temporary, but that the problem would still persist for months to come.
Other US carmakers make a big impact on cars General Motors (GM) decreased by 2.3% and Ford (F) decreased by 1%.
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Tesla cuts prices
Meanwhile, Tesla apparently also stopped taking orders for the cheapest version of the Model Y Standard Range sports utility vehicle earlier this week. The SUV disappeared just over a month after the launch of the Tesla website and barely a week after a price reduction. CEO Elon Musk later explained that the vehicle is available on special order.
Last week, Tesla cut base model Model Y by $ 2,000 to $ 39,990. Tesla increased the price of its Performance models by $ 1,000, including the Model Y, which rose to $ 60,990. Tesla’s website also showed a $ 1,000 price reduction for the Model 3 and Y Long Range Dual Motor AWD on Monday. The Model Y LR now costs $ 48,990, and the Model 3 LR costs $ 45,990.
Some observers have suggested that the price drop is a sign that increased competition is reducing Tesla’s market share. Wedbush’s Ives says he never considered this Model Y version as the needle for Tesla.
“Continued price reductions have been part of the overall Tesla strategy over the past year and we do not expect that to change,” he said. Ives added that since GM and Ford, among others, the stalwarts on EVs over the past month, the $ 5 billion EV market over the next decade ‘will have many winners around the world’.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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