Stock markets bounced back broadly on Tuesday morning, with the S&P 500 gaining back 1.5% after losing money for three straight days, and the Nasdaq popping 2.2%.
Electric-car leader Tesla (TSLA -1.66%) is riding the rally and up 3.4% as of 10:10 a.m. ET -- but beware! Investors appear to be in the mood to buy tech stocks again today, on the theory that three days of selling must have turned at least some stocks into bargains. But when it comes to Tesla stock in particular, the news is actually not good.
As Reuters reported late last night, the situation with Tesla's gigafactory in China has gone from bad to worse. No longer closed because of measures to contain COVID-19, Tesla's Gigafactory Shanghai has still been all but shut down due to lack of car parts.
According to the news agency, Tesla's car sales in China plunged 98% in April when COVID measures kept its factory gates shut tight. As city authorities worked with Tesla to get operations going again, the company was able to ramp back up to about 1,200 cars produced per day (about half of its production pre-clampdown). But now output has been strangled by car parts shortages -- to the point Tesla's producing only 200 cars per day in China.
Now what does this mean for Tesla in China? In the near term, I fear the news will not be good.
Two hundred cars per day works out to 73,000 cars per year at present production rates -- or about as many cars as Tesla used to produce in just one month. So long as Gigafactory Shanghai remains essentially shuttered (whether because of restrictions on Tesla, or because of restrictions on Tesla's suppliers), it'll be hard for Tesla to hit its target of growing global production to 1.5 million cars this year. To that extent, today's abrupt turnaround in Tesla's stock price appears to be a wrong reaction.
On the other hand, Tesla is more than just China -- much more. Long-term, production at Tesla's factories in California, in Texas, and in Germany will ramp up and pick up the slack from Shanghai. Long-term, Shanghai itself is eventually going to get back to normal.
Sooner or later, the news for Tesla will get better. Today's price pop suggests investors know this -- and are right.