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You’re here (TSLA) has reportedly halted production of its Model 3 sedan at its Fremont, California plant amid a global chip shortage hitting the auto industry. Tesla stock has fallen.
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Staff at the Model 3 production line have been told their line will be inactive from Feb.22 to March 7, sources told Bloomberg News.
Tesla would pay staff for February 22 and February 23, but not for February 28, March 1, 2, and 3. Instead, they were advised to take vacations, if possible.
The report did not specify why Tesla had halted operations, but the global chip shortage may have been one reason. The winter storm in Texas last week that shut down the Samsung plant in Austin may have had an additional impact on chip supply.
While it’s not clear if Samsung is currently supplying chips to Tesla, it has been a customer in the past. And the two announced a partnership last January to produce a new 5-nanometer chip for fully autonomous driving, according to Electrek.
Wedbush analyst Daniel Ives said the shutdown was “more related to chip shortages (not demand), which continue to hit GM and other automakers in the near term.”
He added that based on his analysis, there is still a supply of 3 models from Q4 in Fremont’s batch and he is “not too concerned about this supply chain / factory disruption. which changes the overall delivery trajectory for the first quarter and 2021 “.
It is not known how much production will be lost due to the temporary shutdown. The Fremont plant has a production capacity of 600,000 vehicles per year. Tesla, which delivered nearly 500,000 vehicles worldwide last year, said it plans to increase deliveries by more than 50% this year.
In 2020, Tesla closed the Fremont plant for the holidays, from December 24 to January 11. At the time, Tesla offered a full week’s pay, as well as a few paid holidays. Employees were also asked to take five days of unpaid leave unless they opted in and found work in other areas of the plant.
Tesla also produces Model 3s at its Chinese plant, but the Fremont plant has the largest capacity.
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Tesla stock
Shares fell 3.6% to 715.60, on the stock exchange today. IBD Leaderboard Tesla stock is firmly below its 50-day moving average after dropping out of the 800 level, according to MarketSmith chart analysis. With two sell signals triggered, investors should consider taking profit.
Tesla shares have seen their relative strength decrease in recent weeks. His RS rating is still 96 out of a possible 99, while his EPS rating is 76.
Tesla isn’t the only automaker that recently closed its doors to deal with chip shortages. General Motors has extended the shutdowns of three assembly plants from a week in early February to more than a month until mid-March.
In January, Ford closed a plant in Louisville, Ky., Due to chip shortages. The company said at the time that the shutdown was temporary, but the problem would be permanent for months.
Other U.S. automakers take big EV steps General Motors (GM) fell 2.3% and Ford (F) was down 1%.
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Tesla cuts prices
Meanwhile, Tesla also appeared to stop taking orders for the cheaper version of the Model Y Standard Range sport utility vehicle earlier this week. The SUV disappeared from Tesla’s website just over a month after its launch and barely a week after a price drop. CEO Elon Musk later clarified that the vehicle is available off the menu by special order.
Last week, Tesla slashed the base Model Y from $ 2,000 to $ 39,990. Tesla raised the price of its Performance models by $ 1,000, including the Model Y, which rose to $ 60,990. Tesla’s website also showed a price cut of $ 1,000 for the long-range dual-motor Model 3 and Y on Monday. The Y LR model now costs $ 48,990 and the 3 LR model costs $ 45,990.
Some observers have said the price cuts are a sign that increased competition is shrinking Tesla’s market share. Ives of Wedbush says he never saw this version of the Model Y as a needle movement for Tesla.
“Continuing to cut prices has been part of Tesla’s overall strategy over the past year and we don’t expect that to change,” he said. Ives added that as Detroit mainstays GM and Ford, among others, have moved in over the past month, the $ 5 trillion electric vehicle market over the next decade “will have many winners around the world. “.
Please follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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