Tesla (TSLA) will start shipping made-in-China Model 3 sedans to Europe, a shift from prior plans as electric car rivalries intensify on the continent. Tesla stock rose.


New Model 3 buyers in Europe are being told that their cars are coming from China, Electrek.com reported Sunday. The website cited a bill from a Tesla buyer in France.

Tesla later confirmed the move in a statement to Reuters, which also reported that deliveries of the Chinese Model 3s will begin this month.

Using a lower-cost Shanghai plant to serve Europe could boost Tesla’s closely watched margins. It also could enable price cuts to deal with still competition in Europe, including from Volkswagen (VWAGY) and BMW (BMWYY).

On the flip side, the move appears to offer further evidence of weak demand in China. Moreover, EV upstarts such as Nio (NIO), Li Auto (LI) and Xpeng Motors (XPEV) are challenging Tesla’s dominance in that country, the world’s biggest market for electric vehicles.

When Tesla started building its Shanghai factory, CEO Elon Musk insisted it wasn’t just a cost-cutting move but that the factory would serve local demand.

Tesla’s backtracking on that vow mean more made-in-California Model 3s for North America. But U.S. sales are far below the 2019 peak.

Also, the move to sell made-in China Model 3s to Europe sales is likely to be temporary. Tesla’s Berlin plant is set for completion in mid- to late 2021.

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Shares added 1.4% to 446 in early Monday stock market trading. Last Wednesday, Tesla stock moved past a 448.98 buy point but pulled back the next two days, undercutting the entry.

It’s possible shares could have a handle as of Wednesday’s close, just in time for earnings. The relative strength line, which gauges a stock’s strength against all stocks in the S&P 500, is just below recent highs. It is the blue line in the chart shown.

Among other electric car stocks, Nio gained 0.6% in Monday’s premarket, Li Auto gained 1.4% and Xpeng advanced 1.1%. Volkswagen and BMW shares were not active early.

Embattled electric truck startup Nikola (NKLA) rallied 1.2% as JPMorgan analyst Paul Coster suggested that a partnership with General Motors (GM) is still likely. GM stock gained nearly 1%.

IBD Leaderboard stock Tesla reports earnings Wednesday night. Tesla’s guidance on full-year production and deliveries will be key. So will an update on plans for factories and electric cars in 2021.

Find Aparna Narayanan on Twitter at @IBD_Aparna.


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The post Tesla’s Shift On Model 3 In Europe Signals Upside And Weakness appeared first on Investor’s Business Daily.

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