TSLA Stock: Tesla Plans to Build New Shanghai ‘Megapack’ Factory


  • Tesla (TSLA) has announced plans to expand its solar energy production empire.
  • It will begin work on a new battery pack factory in Shanghai later this year.
  • But this news isn’t helped TSLA stock overcome the broader forces working against it.
TSLA stock - TSLA Stock: Tesla Plans to Build New Shanghai ‘Megapack’ Factory

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This week began with some important news from Tesla (NASDAQ:TSLA). The electric vehicle (EV) leader plans to build a new battery production facility in Shanghai. In a tweet yesterday, CEO Elon Musk stated that the purpose of the new plant would be to supplement the output of the company’s factory in California. It will manufacture “Megapacks,” the large-scale batteries upon which Tesla is banking a lot. This sounds like a positive development, but TSLA stock has fallen since markets opened today. It’s unlikely that these declines are linked to the new factory news. However, the fact that shares are down in the face of a major announcement does warrant a closer look.

Let’s dive deeper into the story and assess what investors should be expecting as Tesla advances toward this new goal.

What’s Happening With TSLA Stock

As of this writing, TSLA stock is down almost 4% for the morning. While it has since regained some of its lost momentum, the stock remains firmly in the red, and its current trajectory doesn’t suggest a rebound is likely. Investors Business Daily speculates that these declines are possible due to the market’s adverse reaction to Tesla’s recent price cuts, which may call the company’s future into question for some.

It makes sense that news of further price cuts would push TSLA stock down. Especially concerning is the fact that this is the third time this year that the EV giant has reduced the prices of its U.S. lineup. But investors shouldn’t ignore another troubling factor. Tesla announced a major development yesterday that could certainly boost shares in the long term. However, news of the new battery factory isn’t helping TSLA escape the shadow cast by the price cut trend. And the promise of a new battery production facility is no small thing. Per The New York Times:

“The batteries, which Tesla calls Megapacks, are designed to store large amounts of electricity — a single Megapack can power 3,600 homes for one hour, according to Tesla. The batteries, which are roughly the length and height of an international shipping container, can discharge the electricity to run factories or homes when demand from the local power grid is high, or during a blackout.”

If Tesla can find a more efficient way to mass produce them, it will undoubtedly help the company continue conquering the home solar energy market. Reuters reports that according to Chinese media outlet Xinhua, the company plans to begin work on the new facility in Q3 2023. If all goes according to plan, megapack production will commence during Q2 2024.

However, Musk’s history of missing deadlines is long and well-documented. It may be hard for investors to take any dates his company outlines too seriously.

Tesla’s Charge Is Low

It’s worth noting that the recent price cuts aren’t the only factor negatively impacting Tesla. Musk’s brother Kimball recently offloaded a significant chunk of TSLA stock. And as InvestorPlace contributor Larry Ramer notes, competition from other EV producers is rising steadily, making Tesla look increasingly less attractive. The company has needed a positive growth catalyst since last week, and today it got one.

Unfortunately, news of a new factory that can help Tesla gain a share of a fast-growing market hasn’t helped shares rise today. This could be an indication of worse things to come.

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/2023/04/tsla-stock-tesla-plans-to-build-new-shanghai-megapack-factory/.

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