Tesla (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 shares are down.
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Model 3 production line personnel were told their line would be inactive from February 22 to March 7, sources told Bloomberg News.
Tesla would pay staff for Feb. 22 and Feb. 23, but not Feb. 28, March 1, 2, and 3. Instead, they were advised to take a vacation if possible.
The report did not state why Tesla was discontinuing operations, but the ongoing global shortage of chips may have been one of the reasons. The Texas winter storm that closed Samsung’s Austin plant last week may have further impacted chip pan supplies.
While it’s unclear whether Samsung is supplying chips to Tesla at this point, 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 self-driving, Electrek said.
Wedbush analyst Daniel Ives said the shutdown has “more to do with chip shortages (and not demand-driven), which will continue to plague GM and other automakers in the near term.”
He added that, based on his analysis, there is still a stock of Q4 Model 3s in the Fremont lot and he is “not overly concerned that this supply chain / factory disruption will change the overall supply path for Q1 and 2021.”
It is not known how much production is lost due to the temporary shutdown. The Fremont plant has a capacity of 600,000 vehicles per year. Tesla, which delivered nearly 500,000 vehicles worldwide last year, expects to deliver more than 50% more this year.
In 2020, Tesla closed its Fremont plant for the holiday season, December 24 to January 11. At the time, Tesla offered a full week’s wages along with a few paid vacation days. Employees were also asked to take five days off unpaid unless they chose and found work in other parts of the factory.
Tesla also manufactures Model 3s at its factory in China, but the Fremont factory has the largest capacity.
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Tesla stock
Shares today fell 3.6% to 715.60 on the stock market. Tesla’s IBD Leaderboard stock is well below the 50-day moving average after passing the 800 level, according to MarketSmith chart analysis. Now that two sell signals are triggered, investors should consider taking some profit.
Tesla stocks have seen the relative strength line fall in recent weeks. The RS rating is still a solid 96 out of 99, while the EPS rating is 76.
Tesla isn’t the only carmaker to recently shut down a store to deal with chip shortages. General Motors extended the closure of three assembly plants from a week in early February to more than a month to mid-March.
In January, Ford closed a plant in Louisville, Kentucky, due to a shortage of chips. The company said at the time that the shutdown was temporary, but the problem will persist for months to come.
Other American car manufacturers are making a big step in EVs General engines (GM) fell 2.3% and Ford (F) decreased by 1%.
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Tesla lowers prices
Meanwhile, earlier this week, Tesla also appeared to stop taking orders for the cheapest version of the Model Y Standard Range SUV. The SUV disappeared just over a month after the launch from the Tesla website and barely a week after a price cut. CEO Elon Musk later clarified that the vehicle is available on special order off the menu.
Last week, Tesla lowered the base model Model Y by $ 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 $ 1,000 price cut 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 said the price cuts are a sign that increased competition is diminishing Tesla’s market share. Wedbush’s Ives says he never thought of this Model Y version as moving the needle for Tesla.
“Continuous price cuts were part of the overall Tesla strategy over the past year and we don’t expect that to change,” he said. Ives added that since Detroit, including GM and Ford, went all-in on EVs for the past month, the $ 5 trillion EV market will have “many winners around the world” over the next decade.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia
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