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Tesla stock jumps after company says it is pausing factory to prepare for Model 3 production

Tesla stock jumped Thursday, a day after the company said it is pausing production at its Fremont, California, factory to begin development of its Model 3 sedan.

The move is a clear sign that the company is on track with development on the much-anticipated car, which is scheduled to go into volume production later this year.

The stock was up roughly 2.5 percent during midday trading.

In a statement sent to CNBC, Tesla representatives said the pause had been planned, and that they intend "add capacity to the existing paint shop so that it is ready for Model 3, and perform general maintenance on other factory equipment. This will allow Tesla to begin Model 3 production later this year as planned and enable us to start the ramp towards 500,000 vehicles annually in 2018."

They added they do not expect the pause to affect first-quarter production or deliveries because they have added extra production days to compensate.

At $35,000 without tax rebates, the Model 3 will be Tesla's first mid-priced car intended for the mass market. Over time, Tesla has teased some details, such as photos of design models and information on the car's performance.

Earlier this week, Tesla Chairman and CEO Elon Musk tweeted that the car will not offer the chance to upgrade to Tesla's longest-range 100 kilowatt-hour battery, which is offered for both the Model S and X. Musk said the car will be too small to accommodate the large battery.


Analysts have called Tesla's production timeline for the car "aggressive," and some have speculated that its debut may be delayed at some point.

However, in a research note published Thursday, Baird analyst Ben Kallo said he expects about 25,000 Model 3 deliveries in 2017, adding that he had grown more confident of Tesla's timeline after touring the Gigafactory in Nevada.

Kallo also advised clients to buy Tesla shares ahead of the company's Feb. 22 earnings release because he anticipates sales will be better than expected and product news will be positive.