Why Tesla Stock Raced Higher Today
What happened
Shares of Tesla (NASDAQ: TSLA) gained 4.7% Tuesday on a report showing strong China sales for the electric vehicle (EV) maker in August.
Additionally, The Wall Street Journal reported Monday that Tesla was well-positioned to win federal grant money for building out its charging network, opening up another revenue stream for the EV leader.
Image source: Tesla.
So what
According to the China Passenger Car Association, Tesla sold 84,159 China-made EVs last month, up 9.3% from a year ago. Sales of those Model 3s and Model Ys jumped by 30.9% from July to August, showing strong demand for its vehicles in China and other markets the Shanghai Gigafactory supplies.
The numbers show that the automaker's most valuable plant has overcome manufacturing challenges and is cranking up production.
China's EV leader, BYD, outgrew Tesla, selling 274,086 vehicles in August, up 57.5% from a year ago. However, BYD's vehicles tend to sell at lower prices.
Elsewhere, a Wall Street Journal report said that Tesla was building out charging stations cheaper and faster than its competitors, and its speed and cost advantages have helped it win millions of dollars in federal grant awards and establish a key infrastructure advantage as electric vehicles go mainstream.
Three out of five fast chargers in the U.S. are in Tesla's network, showing it has a significant head start in the race, which should help solidify its advantage in the growing EV market. One projection from Piper Sandler said Tesla could bring in $885 million in supercharger revenue next year, and $10 billion annually in a decade.
Now what
Tesla shares have more than doubled this year as investors have responded favorably to its decision to open up its charger network to EVs made by other companies, as well as its strategy of cutting prices and sacrificing some profits in pursuit of market share gains. Meanwhile, the company continues to deliver strong growth as EVs take market share from traditional combustion vehicles.
While high expectations are still priced into the electric vehicle stock, the China sales update and the Journal's report on its superchargers both show that Tesla still has a long growth runway in front of it.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BYD and Tesla. The Motley Fool has a disclosure policy.
