Why Tesla Shares Dropped Today

What happened

Shares of Tesla (NASDAQ: TSLA) have been on a roll recently with a 20% gain over the last three weeks. But some investors are trimming their positions today. The stock dropped about 6.5% early Tuesday, and shares remained down 4.8% as of noon ET.

So what

While today's dip might be profit-taking on the back of recent gains, there were two catalysts that likely initiated the decline. Some electric vehicle (EV) investors may have shifted investment funds into Ford Motor Company today, after it said that it was again raising planned production capacity for its F-150 Lightning pickup due to surging demand. That prospect of strong competition and a separate announcement from Tesla itself seem to be driving today's stock action.

front view of black Tesla.

Image source: Tesla.

Now what

China has been an important market for Tesla, and a controversial announcement may have made some investors skittish today, too. The company opened a new sales and service center for its EVs in China's Xinjiang region. The company announced it on Chinese social media, and it was reported by CNBC. The area is home to a Muslim population known as the Uyghurs, which the United Nations and various human rights organizations identify as being oppressed by China's government.

Tesla and its CEO, Elon Musk, have walked a fine line trying to appease the Chinese government to maintain a welcome presence in the country. Recent criticism of Starlink satellites operated by Musk's SpaceX has come from China after what the Chinese called a near-miss with its space station.

While Tesla and Musk may have entered Xinjiang solely for business reasons, it inevitably sparked uncertainty over potential protests and pushback. Today's move in Tesla stock seems to make sense based on growing competition and the desire for investors to avoid controversy.

10 stocks we like better than Tesla
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and Tesla wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of December 16, 2021

Howard Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.