Tesla (TSLA) to Boost Shanghai Production, Open Berlin Plant


Tesla


TSLA

recently indicated plans of investing approximately 1.2 billion yuan ($188 million) in ramping up production at its Shanghai Gigafactory in China. The expansion plan comes in as the factory is nearing the exhaustion of its current capacity.

Shanghai Gigafactory, Tesla’s first factory outside the United States, commenced operations in January 2019 and achieved an annualized production capacity of more than 450,000 electric vehicles (EVs) within two years.

A filing on the Shanghai government’s platform for companies’ environmental information disclosures revealed the U.S. EV behemoth’s plans to outlay cash for expanding production lines. The upgrade will take place within the plant’s existing production area. Tesla currently manufactures electric Model 3 sedans and Model Y sport-utility vehicles (SUVs) at its Shanghai plant and this expansion will be targeted at accelerating production of these vehicles.

As part of the upgrade plan, Tesla will employ an additional 4,000 production staff, bringing the total employees at the factory to roughly 19,000. However, the EV giant did not reveal how much the plant’s production capacity will boost after the upgrade. The project is anticipated to commence this December and conclude in April 2022.

China is Tesla’s second-largest market after the United States, accounting for about 30% of its top line. Tesla currently manufactures electric Model 3 sedans and Model Y SUVs at its Shanghai plant in China. Tesla regained its China market share once it started selling domestically-produced vehicles in the country in late 2019. Those were 13% cheaper for China consumers than the vehicles imported from the United States. The EV giant had also received strong backing from Shanghai when it built its first overseas factory there in 2019.

The China market is key to Tesla’s global growth ambitions. In fact, Tesla’s Model 3 sedan is one of the best-selling EVs in the country. The company has a dominant market share in the mainland, with a sale of 147,445 vehicles last year. The company’s flagship model in China — Model Y — also secured a green signal for sale in the country last December. However, Tesla has had its share of setbacks in China, with the automaker under strict regulatory scrutiny due to several accidents in the past few months.

Nonetheless, amid the recent backlash faced by Tesla in China, the sales spike in China in October is a bright spot for the carmaker. Per the China Passenger Car Association (CPCA), the EV giant sold a total of 54,391 China-made EVs in October, including the export of 40,666 units. The delivery count represents a whopping 348% surge year over year. Further, the automaker plans to eventually produce a $25,000 electric car designed and built in China.

In some other news, Tesla is set to begin production at its Berlin Gigafactory in Germany in December. The auto biggie estimates as many as 30,000 vehicles to be manufactured there in the first half of 2022. Serial production will start in January, with the production rate gradually rising from 1,000 cars per week in January.

This news puts an end to Tesla’s wait to get production lines rolling at its Giga Berlin. Production was scheduled to commence in July but was delayed because the company did not receive environmental clearance. Reportedly, local regulators are expected to grant the necessary permits within a couple of days.

Securing a green signal to begin production at its Gigafactory in Berlin marks an important milestone for the EV giant, which is currently catering to the demand in Europe by exporting from its Shanghai Gigafactory. This involves several logistical hurdles and also increases lead times. Thus, production commencement at the Berlin plant was the need of the hour for the automaker.

Tesla currently flaunts a Zacks Rank of 1 (Strong Buy). You can see


the complete list of today’s Zacks #1 Rank stocks here.

Key Auto Companies to Tap On

Other top-ranked stocks in the auto space include

Goodyear Tire


GT

,

LCI Industries


LCII

and

Harley-Davidson


HOG

, all of which flaunt a Zacks Rank of 1.

Goodyear has an expected earnings growth rate of 196.86% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 49 cents over the last 30 days.

Goodyear beat the Zacks Consensus Estimate for earnings in the last four quarters. GT has a trailing four-quarter earnings surprise of 228.45%, on average. Its shares have rallied 99.5% over the past year.

LCI Industries has an expected earnings growth rate of 67.95% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 45 cents over the last 30 days.

LCI Industries beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. LCII has a trailing four-quarter earnings surprise of 10.09%, on average. Its shares have rallied 21.1% over the past year.

Harley-Davidson has an expected earnings growth rate of 31.75% for the current quarter. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 32 cents over the last 30 days.

Harley-Davidson beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. HOG has a trailing four-quarter negative earnings surprise of 138.45%, on average. Its shares have dropped around 6.5% over the past year.


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