Insights

Why Tesla Shares Jumped Initially, Then Retreated Today

What happened 

Investors pushed the share price of Tesla (NASDAQ: TSLA) up 4% this morning, likely after the electric vehicle (EV) stock made double-digit percentage gains yesterday following comments by Tesla CEO Elon Musk. But by midday today, the EV stock had given up nearly all of its early gains and was essentially flat as of 3 p.m. ET. 

So why the retreat? It may have to do with Tesla’s Shanghai factory. 

So what 

Reuters reported today that Tesla’s Shanghai factory will suspend operations for two weeks as the EV company makes some upgrades to the factory. That’s not earth-shattering news for the company or its investors, but the temporary closure comes on the heels of the plant suspending operations this spring due to COVID-19.

Image source: Getty Images.

Investors may be overreacting a bit to this news because they’re still a bit nervous about any reports about the Shanghai plant stopping its operations. China’s strict zero-COVID policy caused the factory to halt production for 22 days back in the spring and resulted in the company missing some production goals for the plant. 

But the plant upgrades should actually be a good thing for Tesla and investors. Reuters reports that the upgrades should help the EV company increase output at the plant to a new record high and help the factory reach a weekly production of 22,000 vehicles. 

Now what 

It’s not surprising that investors are a bit nervous about the news of a plant temporarily suspending operations, but Tesla shareholders shouldn’t be concerned about today’s news. 

The temporary suspension of the plant should ultimately help the company produce more vehicles and keep the company on track to make even more vehicles this year than last. 

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

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