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Tesla Inc. has wrestled a deal to reopen its sole U.S. car-making plant, with Wall Street worries moving on to possible capacity constraints and whether the company will meet longer-term goals.
Tesla TSLA, -2.79% Chief Executive Elon Musk had reopened the Fremont, Calif., plant on Monday in defiance of a local stay-at-home order to curb the spread of the coronavirus and after igniting Twitter and legal spats that prompted even President Donald Trump to chime in.
Health authorities in Alameda County, where the plant is located, confirmed late Tuesday that Tesla was on track for a full reopening shortly.
“We are not surprised Alameda County blinked,” CFRA analyst Garrett Nelson told MarketWatch.
Moving Tesla out of California, one of Musk’s threats, “would have been quite detrimental to state and local tax revenue, but perhaps even more detrimental to the reputation of the state and county as places to conduct business going forward given the massive attention surrounding the situation,” he said.
“In the future, rest assured that Tesla’s growth will be taking place in states such as Nevada, Texas and elsewhere,” Nelson said.
Compliance and “collaborative attitude to Alameda County” is a positive for Tesla, analysts at Evercore ISI said in a note Wednesday. “Our attention turns to… ‘at what capacity will the facilities be running at by June?’”
Tesla shares were among the few gainers on Wednesday, and the stock has held on to an astounding overperformance compared with the broader equity indexes. So far this year, the stock has gained 94%, versus a loss around 11% for the S&P 500 index SPX, -1.82% and 18% for the Dow Jones Industrial Average. DJIA, -2.02%
With Tesla coming on line, all major U.S. car makers are set to restart production in the next few weeks, promising to put in place health and safety precautions amid the pandemic.
Related:Elon Musk wipes nearly $15 billion off Tesla’s valuation by tweeting that shares are ‘too high’
Tesla has vowed to sell more than 500,000 vehicles in 2020, a goal that even before the pandemic some analysts had considered ambitious.
In a letter to shareholders last month to report first-quarter earnings, Tesla said it has the “capacity installed” to deliver more than half a million vehicles in 2020 “despite announced production interruptions.”
It’s “highly unlikely that Tesla is going to be able to hit the guidance with Fremont having been idled for almost two months given the fact that the plant accounts for over 70% of Tesla’s total vehicle production capacity,” CFRA’s Nelson said.
“However, we think this is widely understood by investors, who are clearly taking a longer-term view of the story, as evidenced by the massive rebound in the shares since late March.”
In a press release late Tuesday, Alameda County health officials said they had reviewed Tesla’s safety plan for Fremont and had made additional safety suggestions.
If Tesla’s plan “includes these updates, and the public health indicators remain stable or improve, we have agreed that Tesla can begin to augment their Minimum Business Operations this week in preparation for possible reopening as soon as next week.”
Alameda is one of six San Francisco Bay Area counties under a lockdown order set to expire May 31. The regional order was loosened earlier this month, but not the counties are not moving as fast as neighboring localities and the state, which has been one of Tesla’s points of contention.
On the Tuesday note, the county seemed to deflect some criticism that Tesla had been favored, adding that, as planned, by next week it would allow “additional approved activities for local businesses” provided data showed progress with COVID-19 “indicators” — enough testing, contact tracing, and availability of personal protective equipment among them.
Musk had waged a campaign against the restrictions, culminating Saturday with the promise to move Tesla headquarters and plant out of California to Texas or Nevada — and a lawsuit against Alameda County.
Tesla’s battery factory outside Reno, Nev., is reportedly open as well. Its solar-panel factory in upstate New York is closed under local shutdown orders.
Musk had also railed against the orders on a conference call with analysts to discuss Tesla’s first-quarter earnings, calling them “fascist.” In previous Twitter spats, Musk had also called the “panic” over the coronavirus “dumb.”
