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Why Tesla Stock Was Slammed on Thursday

By Daniel Sparks - Feb 25, 2021 at 5:40PM

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The electric-car maker may have paused production of its Model 3 in California.

What happened

Shares of Tesla (TSLA -6.42%) were crushed on Thursday. The stock fell more than 8% by the time the market closed.

The growth stock was likely down both because of a sharp sell-off in the overall market and news that the automaker's Model 3 production line in Fremont, California may have temporarily paused.

A chart showing a stock price falling sharply.

Image source: Getty Images.

So what

The Model 3 production line at Tesla's California factory is shut down between Feb. 22 and March 7, according to a Bloomberg report on Thursday. The business news website said its source is "a person familiar with the matter." Bloomberg speculates that the issue may be supply chain related, as there are severe snowstorms impacting ground transportation.

Tesla shares were also likely negatively impacted on Thursday by a sell-off in the overall market. The S&P 500 index and Nasdaq Composite ended the day down 2.5% and 3.5%, respectively.

Now what

A production pause for Tesla's Model 3 could have a material impact on the company's sales. Not only is the Model 3 one of the company's best-selling vehicles (alongside the similarly priced Model Y), but the company produces more Model 3 and Y vehicles at its California factory than anywhere else in the world.

Fortunately, however, Tesla isn't as dependent on its California factory as it was in the past. In late 2019, Tesla started production of Model 3 vehicles at a factory in Shanghai. The automaker added Model Y production to the factory last year. 

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