Why Tesla stock did a U-turn today

Tesla will delay some deliveries. Hooray?

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

What happened

Yesterday, shares of electric car leader Tesla (NASDAQ: TSLA) took a 2.4% tumble as U.S. media obsessed over Elon Musk's emailed ultimatum: Tesla office workers must cease working from home and report to the office, or else find a new job and "pretend to work somewhere else." Today, though, Tesla's stock took a turn for the better, rising 4.7%, as investors reacted positively to news that the company is delaying delivery of longer-range electric vehicles in the U.S. Why is that?

So what

Reuters is reporting that because of snarls in the automotive parts supply chain, Tesla has been forced to delay deliveries of certain long-range models of its electric vehicles in the U.S. This sounds like bad news for Tesla -- not what you'd expect to send the stock shooting up. According to the news agency, new orders of long-range versions of Tesla's Model Y electric crossover will not arrive before December, and maybe not until March 2023. Orders for long-range Model X electric SUVs, placed today, won't arrive before February 2023 (and perhaps as late as May). Only with the Model 3 do things look a bit better. Long-range versions of the Tesla electric sedan, ordered today, will at least arrive before the end of this year -- sometime between September and December.  

Now what

What does this mean for Tesla and its investors? I see two possibilities -- not mutually exclusive. First and foremost, delays mean unhappy customers, and customers unhappy with being asked to wait for a new Tesla might decide to buy an electric car from Volkswagen, from General Motors, or from Kia or Hyundai instead. If that's the case, then this supply-chain problem could cost Tesla revenue and further threaten its goal of delivering 1.5 million EVs this year. On the plus side, though, consider: In recent years, "long range" has become kind of the default, and the low-price option for most Tesla EVs -- while premium-fare models with higher price tags are dubbed "performance" or even "plaid." In delaying deliveries of "long-range" models, therefore, Tesla seems to be favoring production and sale and delivery of its highest-priced and highest-margin products -- a pattern we've seen in the past as well at Tesla.       This means that, even if sales and delivery numbers take a hit, Tesla appears to be doing all it can to preserve its profits until the supply-chain problems work themselves out and it can shift back into volume production mode. For Tesla investors, I think that's probably a good thing -- and a reason for Tesla stock to go up, not down.

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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