Tesla (TSLA) reportedly halted production of its model 3 sedan at its Fremont, Calif. Plant, amid a global chip shortage that is hitting the auto industry. Tesla’s shares fell.
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The Model 3 production line team was told that their line would be inactive from February 22 to March 7, sources told Bloomberg News.
Tesla would pay the team on February 22 and 23, but not on February 28, March 1, 2 and 3. Instead, they were advised to take a vacation, if possible.
The report did not specify why Tesla paused operations, but the continuing global chip shortage may have been one of the reasons. The Texas winter storm last week that closed Samsung’s Austin plant may have further impacted the chip supply.
While it is not clear whether Samsung currently supplies chips to Tesla, it has been a customer in the past. And the two announced last January a partnership to produce a new 5-nanometer chip that is fully autonomous, according to Electrek.
Wedbush analyst Daniel Ives said the strike was “more related to chip shortages (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 Models 3 from the 4th quarter in the Fremont lot and he “is not very concerned about the change in the supply chain / plant in the overall delivery path for the first quarter and 2021 “.
It is not known how much production will be lost with the temporary closure. The Fremont plant has the capacity to produce 600,000 vehicles per year. Tesla, which delivered nearly 500,000 vehicles worldwide last year, said it expects 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 an entire week of payment, along with some paid holidays. Employees were also asked to take five days off without pay, unless they opted and found work in other areas of the factory.
Tesla also produces Model 3s at its plant in China, but the Fremont plant has the largest capacity.
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Tesla Stock
Shares fell 3.6% to 715.60 on today’s stock exchange. The shares of the IBD Leaderboard Tesla are firmly below their 50-day moving average after giving up the 800 level, according to analysis by the MarketSmith chart. With two selling signals triggered, investors should consider making some profits.
Tesla’s stock has seen its relative strength fall in recent weeks. Its RS rating is still a solid 96 out of 99, while its EPS rating is 76.
Tesla is not the only automaker closing stores recently to deal with chip shortages. General Motors extended the shutdowns at three automakers from one week in early February to more than a month by mid-March.
In January, Ford closed a factory in Louisville, Ky., Due to a shortage of chips. The company said at the time that the closure was temporary, but that the problem would continue in the coming months.
Other US automakers giving big boost to EVs General Motors (GM) fell 2.3% and Ford (F) fell 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 just a week after a price cut. CEO Elon Musk later clarified that the vehicle is available off the menu, upon special request.
Last week, Tesla reduced the base model Y by $ 2,000 to $ 39,990. Tesla increased the price of its Performance models by $ 1,000, including Model Y, which rose to $ 60,990. Tesla’s website on Monday also showed a $ 1,000 price cut for the Model 3 and Y Long Range Dual Engine AWD. The Model Y LR now costs $ 48,990, and the Model 3 LR costs $ 45,990.
Some observers said the price cuts are a sign that increased competition is reducing Tesla’s market share. Ives de Wedbush says he never saw this version of the Model Y moving the needle to Tesla.
“Continuous price cuts were part of Tesla’s overall strategy last year and we don’t expect that to change,” he said. Ives added that as Detroit, GM and Ford, among others, bet everything on EVs last month, the $ 5 trillion EV market in the next decade “will have many winners worldwide.”
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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