Tesla (TSLA) has reportedly halted production of its Model 3 sedan at its Fremont, Calif., factory amid a global chip shortage that’s hitting the auto industry. Tesla stock fell.
X
Staff of the Model 3 production line were told their line would be idle from Feb. 22 to March 7, sources told Bloomberg News.
Tesla would pay staff for Feb. 22 and Feb. 23 but not for Feb. 28, March 1, 2 and 3. Instead, they were advised to take vacation time, if possible.
The report did not specify the reason Tesla paused operations, but the ongoing global chip shortage may have been one reason. The winter storm in Texas last week that shut down the Samsung factory in Austin could have impacted chip supply further.
While it is unclear if Samsung currently supplies Tesla with chips, it has been a customer in the past. And the two announced last January a partnership to produce a new 5-nanometer chip for full self-driving, according to Electrek.
Wedbush analyst Daniel Ives said the shutdown is “more around chip shortages (and not demand driven), which continues to plague GM and other automakers in the near-term.”
He added that based on his analysis, there is still some supply of Model 3s from Q4 in the Fremont lot and he is “not overly concerned this supply chain/factory disruption changes the overall delivery trajectory for Q1 and 2021.”
It’s not known how much production will be lost due to the temporary closure. The Fremont factory has a capacity to make 600,000 vehicles a year. Tesla, which delivered almost 500,000 vehicles worldwide last year, said it expects to increase deliveries by more than 50% this year.
In 2020, Tesla closed the Fremont factory for the holidays, from Dec. 24 to Jan. 11. At the time, Tesla offered a full week of pay, along with a few paid holidays. Employees were also asked to take five days off unpaid unless they opted for and found work in other areas of the factory.
Tesla also produces Model 3s at its China plant, but the Fremont plant has the biggest capacity.
IBD Live: A New Tool For Daily Stock Market Analysis
Tesla Stock
Shares were down 6.6% at 693.08, on the stock market today. IBD Leaderboard stock Tesla is firmly below its 50-day moving average after giving up the 800 level, according to MarketSmith chart analysis. With two sell signals triggered, investors should consider taking some profits.
Tesla stock has seen its relative strength line slope downward in recent weeks. Its RS Rating is sill a solid 96 out of a possible 99, while its EPS Rating is 76.
Tesla is not the only automaker closing shop recently to deal with chip shortages. General Motors extended shutdowns at three assembly plants from a week in early February to more than a month through mid-March.
In January, Ford shut down a Louisville, Ky., plant due to chip shortages. The company said at the time that the closure was temporary but that the problem would be an ongoing one for months to come.
Other U.S. automakers making a big push into EVs General Motors (GM) fell 3.3% and Ford (F) was down 3%.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Tesla Cuts Prices
Meanwhile, Tesla also appeared to stop taking orders for the cheapest version of the Model Y Standard Range sport utility vehicle earlier this week. The SUV disappeared from the Tesla website just over a month after its launch and barely a week after a price cut. CEO Elon Musk later clarified that the vehicle is available off menu on special order.
Last week, Tesla slashed 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 on Monday also showed a $1,000 price cut for the Model 3 and Y Long Range Dual Motor AWD. The Model Y LR now goes for $48,990, and the Model 3 LR costs $45,990.
Some observers have said the price cuts are a sign that increased competition is cutting into Tesla’s market share. Wedbush’s Ives says he never viewed this Model Y version as moving the needle for Tesla.
“Continued price cuts has been part of the overall Tesla strategy over the past year and we do not expect that to change,” he said. Ives added that as Detroit stalwarts GM and Ford, among others, have gone all-in on EVs over the past month, the $5 trillion EV market over the next decade “will have many winners around the globe.”
Please follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
YOU MAY ALSO LIKE:
Is Tesla Stock A Buy Right Now?
Why This IBD Tool Simplifies The Search For Top Stocks
Want To Get Quick Profits And Avoid Big Losses? Try SwingTrader
Best Growth Stocks To Buy And Watch
IBD Digital: Unlock IBD’s Premium Stock Lists, Tools And Analysis Today