NEW YORK (AP) — On Wednesday, Tesla’s stock surged as investors expressed optimism that the electric vehicle manufacturer and its CEO Elon Musk would gain from Donald Trump’s return to the presidency.
Analysts believe that under a Trump administration, Tesla could see significant benefits, particularly as the potential reduction of subsidies for alternative energy and electric vehicles would impact smaller competitors the most. Furthermore, Trump’s proposed tariffs on Chinese imports could limit the availability of inexpensive Chinese EVs in the U.S. market.
“Tesla has the scale and scope that is unmatched,” noted Wedbush analyst Dan Ives in a message to investors. “This scenario could provide Musk and Tesla with a distinct competitive edge in an environment lacking EV subsidies, especially with anticipated higher tariffs on Chinese products that would deter cheaper Chinese EV manufacturers.”
In contrast to Tesla’s robust performance, shares of competing electric vehicle companies fell sharply. Tesla experienced a more than 14% increase in its stock price, while Shanghai-based Nio dropped 5%. Rivian, known for its electric trucks, saw its stock decline by 9%, and Lucid Group’s shares fell by nearly 8%.
Currently, Tesla commands the U.S. electric vehicle market, boasting 48.9% market share as of mid-2024, according to data from the Energy Information Administration.
Since President Joe Biden enacted the Inflation Reduction Act in 2022, which includes tax credits aimed at fostering clean energy manufacturing and consumer purchases of electric vehicles, the future landscape of EV sales could shift considerably with a change in leadership.
Musk has been an influential supporter of Trump, contributing at least $119 million to galvanize Trump’s backing among Republican voters. He also made a notable pledge to donate $1 million a day to voters who supported his political action committee petition.
Despite the overall positive market response, Tesla has faced challenges this year, as its sales and profits declined during the first half. However, there was a rebound, with profits increasing by 17.3% in the third quarter.
Additionally, the U.S. government has launched an investigation into Tesla’s “Full Self-Driving” system, prompted by incidents involving crashes in challenging visibility conditions, including a fatal pedestrian accident. This investigation is focused on approximately 2.4 million Tesla vehicles produced between 2016 and 2024.
Investor sentiment took a hit last month when Tesla revealed its highly anticipated robotaxi at a Hollywood event, highlighting a perceived lack of progress in the company’s autonomous vehicle technology compared to advances made by other automakers. Tesla first marketed its “Full Self-Driving” software nine years ago, but doubts regarding its effectiveness persist.
As of now, Tesla’s stock has gained 16% this year, buoyed by the recent surge over the past two days.
