Tesla (TSLA) plans to halt production at its factories in China and Germany for several weeks in July, according to media reports. Elon Musk-led Tesla is a market leader in electric cars. However, it faces increasing competition from traditional automakers like General Motors (GM), Ford (F), and Volkswagen (VWAGY), who are transitioning their portfolios to electric models.
In an effort to curb climate change, the demand for electric vehicles (EVs) is growing ever stronger. In 2021, global EV sales doubled from the previous year to 6.6 million units. While the demand is there, EV supply has remained short.
Tesla to Shut Production Lines to Allow Upgrade
According to a Bloomberg report, Tesla’s Shanghai factory in China will pause production of the Model Y car during the first two weeks of July. The halt will allow for the upgrade of the Model Y assembly line to increase weekly production to 14,000 units, from about 11,000 units pre-pandemic.
Once it is done with the Model Y production line upgrade, Tesla will pause the Model 3 assembly line for 20 days beginning July 18, according to the report. It will use the break to upgrade the assembly line to increase output to 7,700 units of Model 3 a week, from 5,500 units.
In Germany, Tesla plans to idle the Giga Berlin factory for two weeks beginning July 11, according to the TeslaMag website. The pause will allow Tesla to make production line changes to double the plant’s current production level from August. The factory only began production in the past few months, and output is still low at only about 1,000 vehicles a week as of June. Tesla will increase the pay of its Giga Berlin factory workers after the production line upgrade, according to TeslaMag.
Tesla Targets a Million Cars from the Shanghai Factory
The Shanghai plant had an initial annual production capacity of 450,000 cars. Tesla has been ramping up production at the plant, and last year the facility delivered more than 484,000 cars. The target is to raise the annual output to more than a million cars. The Giga Berlin has an initial annual capacity of 500,000 cars.
Despite the many headwinds that businesses around the world have been grappling with, Tesla managed to deliver more than 254,000 cars in June 2022. As a result, June 2022 entered the record books as Tesla’s highest production month ever.
Wall Street’s Take
On July 3, Jefferies analyst Philippe Houchois reiterated a Buy rating on Tesla with a price target of $1050, which implies 54% upside potential.
The rest of the Street is cautiously optimistic about Tesla stock with a Moderate Buy consensus rating, based on 16 Buys, eight Holds, and six Sells. The average Tesla price target of $899.86 implies 32% upside potential to current levels. Shares have declined 43% year-to-date.
TipRanks’ Stock Investors tool shows that investor sentiment is currently Positive on Tesla, with 1.2% of portfolios tracked by TipRanks increasing their exposure to TSLA stock over the past 30 days.
Key Takeaway for Investors
Tesla’s effort to boost production is a step in the right direction. The company needs to meet demand for its cars or risk losing business to competitors.
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