An employee works on a Telsa Motors Model S sedan as it makes its way along an assembly line at company's assembly plant in Fremont, California.

The company recently missed its first-quarter targets, it revealed in a vehicle production and deliveries update . But shares in Tesla have bounced higher this week, after CEO Elon Musk promised vehicle production would soon accelerate. He also assured investors that Tesla wouldn't require an equity or debt raise this year.

Tesla is on a quest to make electric vehicles mainstream. After years producing premium electric vehicles in smaller volumes, it is struggling to ramp up the production of its Model 3 sedans.

"On Tuesday morning, there was a small fire in the factory that was immediately contained and extinguished in a matter of seconds. There were no injuries and vehicle production was up and running normally shortly thereafter."

An internal team worked to contain the fire before any alarms went off, according to Tesla employees. It is not uncommon for large employers, especially in manufacturing, to operate an internal fire department.

Two employees with the electric vehicle maker told CNBC that a fire in the company's Fremont factory ground vehicle production to a halt, at least temporarily, on Tuesday morning. The fire occurred in "prime" within the Tesla paint shop, they said. (That's where primer is applied to vehicles in the painting process.)

Tesla had aimed to make 2,500 Model 3s per week by the end of the first quarter this year. Instead, it made 2,020 Model 3s during the week from March 27 to April 3.

In January, Tesla said it made "major progress addressing Model 3 production bottlenecks," in the last quarter of 2017. It also boasted of hitting "a production rate on each of our manufacturing lines that extrapolates to over 1,000 Model 3's per week." But throughout most of the first quarter of 2018, Tesla made fewer than 800 Model 3s per week.

To help the company overcome its manufacturing issues, CEO Elon Musk has reportedly been spending more time on-site at the Fremont factory. Employees told CNBC that made it a bad week for even a "localized" incident like the paint shop fire.

Rumors of the fire circulated on social media on Tuesday. The Fremont Fire Dept. published a tweet that evening which said, "Fremont Fire has not responded to any emergencies at Tesla tonight. There is no reported fire."

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CNBC asked the city and fire department for more details.

A spokesperson for the City of Fremont said: "A call was made to the Alameda County Regional Emergency Communications Center by unknown persons about a possible fire at Tesla on Tuesday. Based on that call, the Fremont Fire Department sent a battalion chief to the factory."

On premise, security teams working at the Tesla factory told the battalion chief that they had not received any internal fire reports. The battalion chief drove around the outside of the Tesla factory with an escort, looking for any signs of fire or smoke in plain view. There were none apparent, so he left.

He did not go within the factory, or the paint shop specifically.

A spokesperson for the City of Fremont acknowledged: "A fire could occur at Tesla and be extinguished by onsite personnel. Depending on conditions, a small fire could be extinguished before an alarm activation, or activation of a fire suppression system."