Recent events have unearthed significant ties between Elon Musk, the billionaire CEO of Tesla, and the incoming Trump administration, leading many to speculate about the direction of Tesla amid rising tensions and national policies aimed at reshaping the electric vehicle (EV) industry.
The question on everyone's mind is straightforward: what happens to Tesla under Trump? Not only has Tesla seen notable financial gains following the recent U.S. elections, but it also stands at the crossroads of international business dynamics with China, and Musk's influence over U.S. foreign policy could have far-reaching consequences.
Now, it's no secret to anyone monitoring the stock market: Tesla’s stocks surged more than 30% since Trump’s election victory, pushing its market capitalization to $1.05 trillion. Investors are not just optimistic about the company’s prowess; they see its CEO, Musk, tightly woven with Trump’s vision for the future. With Musk's connections and influence, analysts expect the company will thrive, especially with plenty of opportunities opening up for them internationally.
Wall Street can hardly contain its excitement; projections suggest Tesla could pull revenues of nearly $100 billion this year, with the number potentially reaching $116.28 billion by 2025. For comparison, just two years ago, the company’s earnings were half of what they are today. Surging performance doesn’t just translate to revenue—it has also seen net income steadily climb, from $5.51 billion to $14.99 billion within the same timeframe.
Still, Tesla's relationship with China raises eyebrows. The Asian powerhouse serves as the site of Tesla's most productive manufacturing plant, the Shanghai gigafactory, which has been pivotal for its profits. A staggering 53.8% of Tesla's total deliveries for the third quarter of 2024 originated from there. Musk’s dealings with Chinese battery supplier, Contemporary Amperex Technology Co., Limited (CATL), have raised concerns, particularly after comments made by CATL's founder Robin Zeng highlighted Tesla's dependency on Chinese manufacturing and technology.
What Zeng said is worth noting: "Tesla needs CATL more than CATL needs Tesla." The gravity of these words resonates especially when considering China's swift rise within the EV sector, posing significant competition to Tesla both domestically and internationally. Zeng's hints about the unpredictability of the relationship between Tesla and CATL present worries about the directions both companies may head—especially if trade tensions increase.
What's more, concerns have been raised about Musk’s focus shifting from vehicle manufacturing and sales to potentially more rapid advancements and breakthroughs tied to artificial intelligence (AI) and autonomous driving technologies. Yes, the ambition behind Tesla’s self-driving capabilities is grand, with promises of significantly impacting the market, but there's skepticism surrounding whether such tech can truly generate revenue comparable to Tesla’s core vehicle sales.
Analysts from Morgan Stanley believe Musk’s commitment to robotics and AI could pave the way for creating autonomous vehicles and sophisticated data centers. If successful, this could amplify demand for Tesla stock significantly. Meanwhile, Tesla’s competing platforms for AI and robotics could allow the automaker to leap ahead of others, thereby solidifying its stance as the leading innovator.
But not everyone is convinced. Some financial experts warn about the potential volatility surrounding price cuts and stable sales. Colin Langan from Wells Fargo cautioned against the fragility of Tesla’s auto business, admitting, "Year to date volume is down 2% and pricing is down 3%.” Factors like these pose risks to investors who are banking on Tesla’s historical resilience.
The climate surrounding Trump's presidency could also shift, especially with discussions transitioning to the EV tax credit originally introduced under Biden. Initial inspections suggest Trump’s team might aim to dismantle these incentives. This would not only shake up Tesla’s pricing models but could also impact the competitive edge against traditional automakers who are refocusing their strategies on electrified vehicles.
Nevertheless, changing tides often prompt innovation. Some observers speculate Tesla could continue drawing on its powerful brand presence to initiate new market strategies, particularly if they manage to leverage growing political alliances with the incoming administration. There is some traction behind the idea of fostering more favorable regulatory environments, theoretically letting Tesla thrive where others wouldn't as the potential for tariff wars with China looms as well.
Despite the foreboding narrative, history has taught investors to tread carefully—not just with Tesla but also the stock market at large. Trying to outsmart Tesla's stock has usually resulted poorly for many seasoned investors, as its ability to recover and excel continues to defy predictions. Betting against the company carries risks; though bears remain skeptical, the majority appear willing to place their bets on Musk’s ambitious vision. So, where does this leave Tesla? At the intersection of political drama and corporate agility, all eyes remain glued to how Musk navigates this complex terrain. The outcome, undoubtedly, will shape the future of not just Tesla, but the entire EV market, for years to come.
