2 Reasons Tesla Motors Accelerated This Week

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis. 

Shares of Tesla Motors (NASDAQ: TSLA  ) accelerated 10.5% this week, with the stock peaking midweek at $154.90 per share, after opening at around $147 a pop earlier in the week. Let's take a closer look at two major developments that happened at Tesla over the past five days, and what they mean for the electric-car maker going forward.

A green tax break
Tesla kicked off the week by locking down a major tax break that will help the automaker boost production of its Model S cars. On Tuesday, California's Alternative Energy and Advanced Transportation Financing Authority (say that three times fast) granted Tesla a $34.7 million tax break on new manufacturing equipment. Here's how it works.

The EV maker plans to spend $415 million on new manufacturing equipment that will increase Tesla's production rate from just 21,500 Model S cars annually to as many as 35,000 cars a year, according to a report from SFGate. Typically, Tesla would be required by California law to pay use and sales taxes on the purchase of this new equipment. However, in this case, the state said it would wave the tax because Tesla is a clean-tech company.

California's state treasurer, Bill Lockyer, was enthusiastic about Tesla's future in the state: "I'm pleased we could take this action to encourage Tesla to expand its electric vehicle production in California, which will create green jobs and improve our air quality." Meanwhile, the benefit to Tesla is even greater. With a cash balance of just $796 million last quarter, Tesla can use every penny it can find -- particularly as the company invests in international expansion and the upcoming launch of its Model X crossover vehicle.

Tesla takes on China
Another reason for the stock's move this week was news that things are moving forward for Tesla in the world's biggest market for sales of luxury sedans. Tesla officially launched its Chinese website this week and is now accepting reservations online. China is the largest auto market in the world, making it a key component to Tesla's future success as an automaker. Moreover, Tesla has now passed all of the homologation requirements in the Asian country and even launched a soft opening for its flagship store in Beijing.

Looking ahead, Tesla's CEO said that company plans to begin Model S deliveries in China as soon as the first quarter of 2014. Moreover, if Tesla were able to replicate even a fraction of its recent success in North America in the Chinese market, it would be a major catalyst for its share price.

Ultimately, Tesla's entrance into China and the company's recent investments in its production capacity were behind the stock's movement this week. However, to be fair, this week's 10% move is small change compared to Tesla's performance so far this year -- shares are up more than 300% year to date.

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  • Report this Comment On December 20, 2013, at 10:31 PM, deeageaux wrote:

    Tesla is making 600 cars per week right now on single assembly line at their Freemont Factory. That is an annualized rate of 30k cars right now on a single shift.

    They are increasing efficiency as factory workers get more proficient at their jobs. The $415M is not to increase production by 13,500 cars per year, that would be ridiculous.

    This is to add a second line at Freemont, most likely for the Model X. It will double production capacity. Maybe to 67k units on a single shift as proficiency continues to improve. They will need to add workers for the second assembly line and may add a second and third shift later. With three shifts working around the clock with small breaks for routine maintenance they could make up to 200k units per year on two assembly lines.

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