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Why Tesla Is Up 6% Today


Jan. 7 2019, Published 2:39 p.m. ET

Tesla stock

On Monday, January 7, Tesla stock was rallying for the second consecutive day. The stock started 2019 on a negative note with 4.5% losses last week. However, on Friday, the stock saw a sharp recovery of about 5.8%, mainly due to the broader-market optimism. Extending these gains, at around 1:10 PM ET, TSLA was trading with 6.0% gains at $336.60. Let’s find out what could be driving optimism in the stock today.

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Key positive factors

In a recent series of tweets, Tesla CEO Elon Musk said, “Looking forward to breaking ground on the @Tesla Shanghai Gigafactory today!” He added that Tesla is “aiming to finish initial construction this summer, start Model 3 production end of the year & reach high volume production next year.”

In the last couple of quarters, China’s high tariffs on US-imported vehicles has hurt Tesla’s competitiveness in the country and affected its margins. As a result, the company sped up its plans to build its Shanghai-based Gigafactory, where it plans to produce cars as well as batteries. Musk, in his tweets, also said that the China Gigafactory “will produce affordable versions of 3/Y for greater China. All Model S/X & higher cost versions of Model 3/Y will still be built in the US for WW market, incl China.”

Tesla signed a cooperative agreement with Shanghai authorities to start building the Gigafactory in July. The company’s update today on its Chinese Gigafactory could the main factor driving the stock up, apart from the broader-market positive movement.

Interestingly, in the fourth quarter of 2018, Tesla yielded a 25.7% positive return despite the broader-market sell-off. Other automakers (XLY) General Motors (GM), Ford (F), Fiat Chrysler (FCAU), and NIO (NIO) lost 0.7%, 17.3%, 17.4%, and 8.7%, respectively, in the last quarter.


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