Interactive Investor

Tesla car production receives major boost in Q1

6th April 2021 15:48

Graeme Evans from interactive investor

Under pressure for a couple of months, Tesla shares are back in demand after it’s Good Friday missive.

Booming Chinese demand has given a jumpstart to the faltering Tesla (NASDAQ:TSLA) share price after Elon Musk's electric vehicle company reported record first-quarter deliveries.

Friday's better-than-expected update revealed over 180,000 vehicles rolled off Tesla's production lines, with interest in the Model Y in China leading to nearly 185,000 deliveries.

Shares rose by 4% on Monday to help the S&P 500 index newcomer rediscover some of the momentum seen before rising bond yields cast doubt over 2020's heady valuation, a year when the stock rose by more than 700%.

Worries about a global computer chip shortage and rising competition have also contributed to Tesla shares coming off the boil in recent weeks, with the stock down 20% since late January.

The latest update shows that the chip issues are not having a major impact after Tesla produced a similar number of vehicles in the first quarter than in the previous three months.

A Tweet from Musk on Monday made “special mention” of Tesla China as the company's update reported rapid progress towards full production for the Model Y at its Shanghai Gigafactory. It added that the new Model S and Model X have also been “exceptionally well received”.

Tesla recorded about 500,000 deliveries in 2020, but analysts think that more than 800,000 is possible this year as demand from the Chinese consumer remains strong and the global economy continues to recover from the Covid-19 pandemic.

This outlook has prompted Wedbush Securities to upgrade its price target on the stock to $1,000, up from $950 previously and about 40% higher than Monday's price.

The meteoric share price rise in 2020 helped to make Musk the world’s richest man. It also boosted the finances of many retail investors after the Nasdaq and S&P 500-listed company was the second most-bought US stock on the interactive investor platform last year.

It has also lifted the value of Baillie Gifford’s Scottish Mortgage (LSE:SMT) investment trust, which still has 4.4% of its portfolio invested in the car maker.

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