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Elon Musk Filed A Lawsuit At California Over The Lockdown; What Are The Implications For Tesla Stock

Our attention is all on Tesla (TSLA Stock Report) this month. Since hitting a low on March 18 at $361, the share price took less than two months to rebound above $800 per share.

The Tesla Fremont plant has been shut down since March 23 due to stay-at-home orders in Alameda County. The Alameda County supervisor said that the county and Tesla had been close to a deal to reopen the plant on May 18, but Musk wanted it open on Friday, May 8.

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Therefore, Tesla is suing local authorities in Alameda as the world largest electric car marker pushes to reopen its factory there. The news makes for high drama, but don’t be surprised if the stock gets a pass. That said, Tesla shares, up to this point, have been relatively immune from the Covid-19 pandemic. Despite facing obstacles in its manufacturing plants in both the US and China, TSLA stock price is showing no slowdown in its rally.

Tesla’s restart plan in California is modelled after the comprehensive return to work plan established at the Shanghai factory. The latter has seen smooth and healthy operations for the last three months, signalling it’s perfectly reasonable to restart the plan with appropriate safety measures.

Is The Fall In China Sales Likely To Hit TSLA Stock? 

Tesla sold just 3,635 Model 3 vehicles in China last month, according to the China Passenger Car Association. That’s a 64% drop from the 10,160 sold in March. This is worrying for Tesla investors because Tesla Shanghai made well over 10,000 Model 3 Sedans. If we are only looking at the fundamentals, then we might want to avoid Tesla at all costs during this quarter.

The only positive note we can take from Tesla would be the lower price of Model 3 in China. The electric car maker made rapid progress on the lowering of its production cost in China. And the price offered will be below the subsidy threshold. Given the lower production costs, Tesla is confident in delivering good gross margin for every vehicle made. This couldn’t come at a better time to boost sales in China when the economy is battered by the coronavirus pandemic.

What’s Next For Tesla?

Despite the current surge in TSLA stock price, some analysts still believe that it is not the right time to buy yet. While some even advocate shareholders to sell TSLA stock now. This is because oil prices are too low now. Apart from environmental reasons, there’s no other obvious advantage of using electric vehicles at the moment.

Of course, there is a very good chance electric cars are going to dominate the market in another 20 to 30 years’ time. Thus, there is still a case to invest in electric car companies. The question we have to ask ourselves is whether there are more attractive stocks out there for the nearer term.

Tesla stock price (TSLA stock)

We see no ends in sight to the current pandemic. We also witnessed a surge in unemployment globally. It could be quite difficult for Tesla to generate the volume of sales required to justify the current stock price any time soon. Perhaps we can look at Tesla again when it falls significantly below its current level. Hence, despite the current bounce of stock price, TSLA stock is not a buy just yet.

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