TSLA Stock Is a Buy as Tesla Ramps Up Shanghai Gigafactory

Tesla (NASDAQ:TSLA) is once again proving that nothing will keep it down. When China’s rising Covid-19 cases forced the electric vehicle (EV) leader to close the doors of its Shanghai gigafactory, it sparked concern. Some experts worried that the loss of production time would impede Tesla’s progress. For a while, those concerns were valid. Today, though, TSLA stock is back in focus on promising production reports out of Shanghai. One of the company’s biggest constraints may be subsiding.

A person walks past the storefront of a Tesla store with several vehicles visible behind a glass door
Source: Ivan Marc / Shutterstock.com

What’s Happening With TSLA Stock

TSLA stock has been rising since the beginning of the week. Why? Over the weekend, Zhang Hongtao, chief engineer of the Shanghai Economics and Information Technology Commission, addressed the company’s progress. At a press conference, he reported that Tesla production has returned to 80% of its previous output.

That figure has been good for TSLA stock. With production its largest EV facility back on track, one of Tesla’s biggest barriers has likely been eliminated.

Why It Matters

While China’s lockdown policies remain mostly in place, the country has opted to let whitelisted companies resume production. Tesla is on this list, and competitors such as Volkswagen (OTCMKTS:VWAGY) have also returned to building cars at their China bases.

The fact that Tesla has managed to get production close to pre-shutdown levels in just a few weeks should remind investors of its ability to keep moving forward.

During Tesla’s recent earnings call, Elon Musk promised that the company’s Shanghai operations would be “coming back with a vengeance.” His company is already delivering on that promise and it is poised to expand these efforts.

Tesla is planning to build a new facility next to the Shanghai gigafactory, creating “the world’s largest vehicle export hub.” StreetInsider reports that this new factory would be able to turn out 450,000 EVs per year. With the first stage of construction completed, the plant will begin producing Tesla Model 3 and Model Ys.

Of course, the Shanghai shutdowns were not Tesla’s only constraint. Supply chain concerns still remain a problem for all EV producers. However, they haven’t stopped Tesla from keeping pace with demand yet. And Musk is helping position the company to stay ahead of its competitors through its recently announced battery progress. All signs point to Tesla seeing smoother roads ahead as it moves forward in the EV race, particularly with production in China set to increase by such significant margins.

What Comes Next

As The Guardian reported late in 2021, “China is the world’s biggest market for EVs with total sales of 1.3m vehicles last year, more than 40% of sales worldwide.” Demand throughout the country is only rising as the energy crisis inadvertently steers consumers toward EV purchases and Tesla is still the best positioned manufacturer to provide them. The newly expanded Shanghai plant is exactly what the company needs to dominate China’s EV market.

Now that the Shanghai gigafactory is demonstrating quick progress and getting to scale even more, investors can rest assured that Tesla’s share of China’s booming market will help elevate TSLA stock.

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.

Article printed from InvestorPlace Media, https://investorplace.com/2022/05/tsla-stock-is-a-buy-as-tesla-ramps-up-shanghai-gigafactory/.

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