Shares in Tesla gained as much as 9% in early trading Monday, as media reports said the automaker’s Shanghai Gigafactory would reopen following a closure due to the coronavirus epidemic. The company will also receive assistance from the Chinese government to resume production, Markets Insider reported.
“In view of the practical difficulties key manufacturing firms including Tesla have faced in resuming production, we will coordinate to make all efforts to help companies resume production as soon as possible,” said Xu Wei, a spokesman for Shanghai’s municipal government, the report said.
Tesla announced on January 29 that it expected a production delay of a week and a half at the factory due to a government-ordered shutdown prompted by the coronavirus epidemic, which has killed more than 900 people, the report said.
The closure was expected to delay deliveries of some Model 3 sedans made at the factory, said Tao Lin, a Tesla vice-president, the report said.
Still, the shutdown and the delay were not expected to have a significant effect on the automaker’s first-quarter financial results, as the Shanghai factory is not yet a major contributor to earnings, Zach Kirkhorn, Tesla’s CFO, said in late January.
Tesla’s stock has whipsawed lately. Last week, the stock posted double-digit gains on Monday and Tuesday and reached as high as US$968.99 per share before falling 17% on Wednesday, the report said.
It fell on fears that the stock’s rapid climb was a bubble or that it was fueled by a short squeeze, when short-sellers stop betting against a stock as the price gains push losses to the limit.
According to ElecTrek, Shanghai’s government has offered assistance to factories trying to get back on their feet, in order to get production back up to speed as quickly as possible.
This help would be in the form of loans with preferential rates and some exemptions from value-added tax for certain sectors. This aid will be available to foreign companies as well as Chinese ones.
Tesla plans to catch up with deliveries as the outbreak subsides, but can’t estimate exactly how long those deliveries will be delayed.