1 Key Reason Why Tesla Motors Traded Near an All-Time High Today

Tesla Motors stock is soaring this week, but not for the reason you might think.

Feb 11, 2014 at 4:40PM

Shares of Tesla Motors (NASDAQ:TSLA) opened the week on a high note, as the stock zoomed to $196 in early trading on Monday. Today, the stock moved above $199 per share in the final hour of trading, edging closer to its 52-week high of $202.20, before dropping back to $196. Shares of the electric-vehicle maker even crossed the $200 mark in early trading on Tuesday.

Let's look at what's pushing Tesla higher this week, and whether investors should be worried about a pullback.

Setting new records
Tesla has come a long way since 2011 when it was the most shorted stock on the Nasdaq. Last year, shares of Tesla quadrupled in value. The company carried that momentum into the new year, with the stock gaining more than 30% so far in 2014. Tesla has China to thank for this week's move, after the Asian country's finance ministry declared higher than anticipated subsidies for electric cars purchased in the nation.

Over the weekend, China said it would trim EV subsidies by just 5% this year and 10% in 2015, according to CNN. That is much less of a reduction than previously expected. Moreover, China offered electric-car buyers a subsidy of between 35,000 yuan and 60,000 yuan per vehicle last year, which translates into roughly $5,780-$9,900, CNN reported.

This news is particularly important because China is a key growth market for Tesla. The EV maker officially began deliveries of its Tesla Model S car in the nation this quarter, and it plans to expand operations in the Chinese market in the quarters ahead. 

Tesla China Picture

Source: Tesla Motors.

Unlike other luxury automakers selling cars in China, Tesla said it would not mark up the price of its vehicles for sale in the Asian market.

Tesla plans to sell its 85-kilowatt-battery Model S in China for roughly 734,000 yuan. That converts to about U.S. $121,370, which includes what Tesla will pay in Chinese taxes, duties, and transportation costs. Tesla CEO Elon Musk said the company will eventually build a factory in China to help meet production demands.

Zipping ahead
Between Tesla's honest pricing strategy and better than expected subsidies in the world's largest auto market, the company's opportunity in China appears brighter than ever. Looking ahead, Musk says Tesla could end up selling more cars in China than it does in the United States. If he's correct, this could just be the beginning of a massive rally in Tesla's stock. Nevertheless, investors will gain more insight into what the future holds when Tesla reports earnings on Monday, Feb. 17.

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Tamara Rutter owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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