What happened

Tesla (TSLA 2.32%) shareholders had a rough day Friday with the stock dropping 7.5%. But the electric vehicle leader's shares rose more than 8% on Monday morning to kick off the new trading week. As of 1:35 p.m. ET, the stock was still up by 7.2%. 

So what

Last week's plunge dropped Tesla to about 50% of its early January high, and some investors may have decided that was the time to buy. Tesla has already reported that it produced almost 366,000 vehicles in the third quarter, including a monthly record 83,135 from its newly upgraded plant in Shanghai, China in September. But some analysts are also wondering how the stronger dollar might impact its earnings. The company will report its third-quarter results on Wednesday after the market closes. 

red Tesla Model S.

Image source: Tesla.

Now what

But news out of Chinese electric vehicle maker BYD Monday apparently helped convince investors that Tesla's Q3 results will be better than some expect. The Warren Buffett-backed company reported better third-quarter results than expected, according to a Barron's report. BYD's operating profit soared by 60% compared to the second quarter. 

Tesla is expected to report a Q3 operating profit of $3.9 billion, which would represent a 56% jump from the previous quarter. The strong results of its competitor in the important China market bode well for Tesla. Both companies have had to deal with COVID-19 lockdowns in the country, which added to their operating expenses as supply chains and operations were impacted. 

Now Tesla investors have reason to think that it will meet or beat expectations. The risk of foreign currency impacts wouldn't be an operational issue, and investors are counting on Tesla's operating performance to grow the company. On Monday, investors apparently felt Tesla shares had dropped far enough, especially if, as they now expect, its operating performance report shines on Wednesday. 

CORRECTION: The 83,135 vehicles Tesla produced in Shanghai came in September and constituted a monthly record.