Why Tesla, Inc. Stock Fell on Tuesday

What happened

Shares of electric-car company Tesla (NASDAQ: TSLA) fell as much as 6.6% on Tuesday. As of around 1:30 p.m. EDT, the stock is down 4.8%.

Tesla stock’s decline comes amid a broader-market pullback on Tuesday, particularly among many growth stocks. At the time of this writing, the S&P 500 is down about 0.7% and the NASDAQ-100 is down about 0.9%. But there are likely other reasons behind Tesla’s outsize decline on Tuesday, namely news of a small fire at the company’s factory and an employee who attempted to “sabotage” Tesla’s manufacturing operating system.

Tesla vehicle production. Image source: Author.

So what

Anything negatively impacting Tesla’s production at this point is a reason for investors to be concerned. The Model 3’s production ramp-up is extremely important for the company right now as the automaker has said it won’t be able to achieve profitability until it ramps up Model 3 production to 5,000 units per week — a target production rate Tesla is aiming to hit by the end of June.

This is why investors may be uneasy after Tesla CEO Elon Musk sent a company email in which he said that “a Tesla employee who had conducted quite extensive and damaging sabotage to our operations,” according to a copy of the email obtained by CNBC. The employee reportedly changed some code on the Model 3 production line and even exported data to unknown third parties.

In another email, Musk said there was “another strange incident that was hard to explain.” It was a small fire in the company’s “body-in-white production line,” Musk said.

Now what

While Musk is warning employees to stay alert about any suspicious activity, the CEO still seems optimistic about achieving Tesla’s target production rate for Model 3.

“Looking forward to having a great week with you as we charge up the super exciting ramp to 5000 Model 3 cars per week!” Musk said in the email about the employee who sabotaged its manufacturing operating system.

The fire’s impact on Tesla seems immaterial, as Musk said there was no “significant equipment damage” and that the body production line was only paused for a few hours as a result of the fire.

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Daniel Sparks owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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