Tesla (TSLA) Stock Rose 6.14%, Company Prepares to Expand its Building Capacity in China

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by Steve Muchoki · 3 min read
Tesla (TSLA) Stock Rose 6.14%, Company Prepares to Expand its Building Capacity in China
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While TSLA stock is quite unstable these days, Tesla has announced its new plans for its production activity in China.

Tesla Inc (NASDAQ: TSLA) stock rose by 6.14% by Wednesday to trade at $644.81 while there were revealed the company’s plans to increase its production capacity in China. The stock market had been bleeding out due to the sharp decline in crude oil prices that hit the market caused by the ongoing coronavirus outbreak.

Since Monday, Tesla (TSLA) stock nosedived after the release of the news on crude oil prices, however, things changed as of Tuesday evening when the company announced it is planning to increase the production capacity for certain car parts.

Basing the argument on technical analysis, the stock price hit February low level which is a strong support point where it’s likely to respect. This being on the higher time frame, the prices might recover from that point, whereby, if it breaks out to trade below $600, things might not be looking great for the automaker stocks.

This is because the price may severely be affected by the ongoing coronavirus and ends up hitting below the belt at $400. With a lot of speculations on Tesla (TSLA) stock trading taking place, analyst warns the recent bull rally might be swallowed by the current health-economic crisis.

Tesla stock enjoyed a good year, whereby, it reported a $4.1 billion gross profit which essentially remained flat 2019 in comparison to 2018. The quarter-end cash and cash equivalent rose by a whopping $930 million, which was driven by the free cash flow of $1.0 billion.

With coronavirus continuing to threaten the daily operations of the company, lower revenue return on the first quarter is likely to push the stock market even lower than it is trading now. However, the company has already taken a huge blow previously, any short term effect of the coronavirus on supply and demand will not be a surprise.

At the moment of writing, TSLA is losing around 3% after hours, falling to $625.30.

Tesla Plans to Increase Capacity in China to Counter Falling Stock Value

With the current slow growth of tesla production in its model 3 units compared to the market demand, the company has announced its plans to increase its production capacity for certain parts in mainland China. This will be done at its $2 billion factory in Shanghai China.

The factory increase will not cover the production of motor controllers, battery packs and also electric motors. However, it will oversee the production of cooling pipes, which are crucial components in a car’s heat management system. Whereby, they are expected to double from 150,000 to 260,000 sets per annum.

With this huge investment in China, the company will localize its entire supply chain in the country by the end of the year. Tesla currently produces 150,000 Model 3 sedans from the Shanghai factory, where it is planning to increase the output to 250,000 per annum by the end of this year.

With these measures put in place, the company is giving investors more confidence to invest in it, hence a big plus on its stock market.

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