Why Tesla stock dropped this morning

Will Tesla have to shut down production in Germany? Short answer: No.

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Red arrow going down symbolising a falling share price.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of electric car manufacturer Tesla (NASDAQ: TSLA) dipped 2.2% in late morning trading Wednesday, down 2.2% as of 11:30 a.m. ET.

The dip erased Tesla's gains from Tuesday, which came as investors digested some positive production news from Tesla's China gigafactory.

So what

The most likely culprit for Tesla's decline today is simply volatility. The whole stock market is pretty much in the red today, and the tech-heavy Nasdaq in particular (many investors consider Tesla more of a tech stock than an automotive stock) is down 1.4%. It makes sense that if investors are nervous about tech, they'd also be nervous about Tesla stock, which at a recent valuation of 122.5 times earnings is quite pricey.

That being said, there's also some substantive news today that may be unnerving investors.

Tesla, as is well known, wants to grow its car production numbers from just under 1 million units last year to as many as 1.5 million units this year. To do that, it's opened two new gigafactories already just this year, one in Texas and another in Germany. But as electrek.com reports today, an environmental group in Germany called "the Green League" has filed a complaint with a German court, demanding that Tesla's operating license in Germany be revoked based on a reported paint leak at its factory.

Now what

With Gigafactory Berlin expected to eventually produce 500,000 cars per year, this is a monkey wrench that Tesla's production plans did not need -- but a close review of the complaint reveals that it probably won't be a huge problem.

As electrek notes, out of "15,000 liters of a paint mixture" that were "pumped out by a disposal company" from Tesla's factory, "two to three liters" of the "slightly hazardous to water" paint mixture leaked onto an access road, and then ... "the paint did not get into the sewage system or groundwater" (emphasis added).

So Exxon Valdez this is not. While the Green League is insisting Tesla should be required to pave areas around its paint shop to ensure any future leaks can't get into the ground water, this sounds like an easy fix. I seriously doubt it's going to have any lasting impact on Tesla's German production...or Tesla's stock price, either. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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