NEW YORK — Enthusiasts of Elon Musk find themselves engaged in a monumental gamble, with Tesla’s market capitalization soaring by over half a trillion dollars since the presidential election. This remarkable ascent continues to defy the odds, as it persists even after a less-than-stellar financial report that would typically cause turmoil for most other companies.
Investors seem to be banking on the belief that President Donald Trump’s policies will bolster Musk’s ventures rather than impede them. His promise to significantly reduce federal regulations and utilize tariffs to influence crucial trade relationships has optimism swirling around the electric vehicle giant.
“We’re on the brink of a golden age for both Tesla and Musk,” remarked Dan Ives, an analyst with Wedbush Securities, during a discussion following an investor conference call where he noted, “This is the most optimistic I’ve ever heard Musk speak.”
The act of investing in Tesla has historically been a high-stakes gamble. Despite prevailing skepticism regarding Musk’s ability to establish a viable electric car business, he has not only succeeded but also expanded Tesla to become the globe’s most valuable automaker — ultimately making himself the wealthiest individual worldwide. However, the current market dynamics present their own set of risks.
Musk envisions the real value of Tesla to lie in future developments, such as a fleet of thousands of robots and fully autonomous vehicles. He has indicated plans to roll out robotaxis in Austin, Texas by June, aiming for a nationwide launch by the close of next year.
The narrative suggests that the Trump administration will expedite these technological advancements, with Musk even acquiring an office within the White House and leading a newly established Department of Government Efficiency focused on cutting down governmental size.
The newly appointed transportation secretary, who wields considerable influence over Tesla’s operations, is committed to reducing excessive regulations in the automotive sector. Sean Duffy has pledged to create cohesive federal regulations on self-driving technology, which would replace the inconsistent state-level guidelines that Musk has criticized as hindering progress.
Furthermore, a shift in Trump’s approach towards China, a significant market for Tesla, has occurred, as he announced a reduced tariff of 10% instead of the threatened 60% during his campaign. However, his imposition of tariffs on Canada and Mexico, alongside China, resulted in an early trading dip of over 5% for Tesla stock, mirroring trends among other automakers. CFO Vaibhav Taneja noted just last week that the company might experience adverse effects due to its global procurement of parts.
Conversely, Trump’s intentions to eliminate a federal tax incentive amounting to $7,500 aimed at promoting electric vehicle purchases could negatively impact Tesla. His aim to relax emission standards might also challenge Tesla’s revenue stream, which derives from selling regulatory credits to other manufacturers that fail to meet environmental criteria. Tesla’s recent quarters saw a significant increase in revenue from these credits.
Questions remain regarding whether the Trump administration will pursue investigations into Tesla, particularly concerning its Full Self-Driving technology, which could necessitate human intervention at any time. The National Traffic Highway Safety Administration has previously opened inquiries following reports of low-visibility crashes, including one that resulted in a fatality.
At a recent congressional hearing, Secretary Duffy assured senators that the facts would dictate the investigation process — indicating he would resist any political pressure to favor Musk given their close ties.
Musk’s need for regulatory leniency and support from Trump has only amplified, especially after Tesla reported a decline in sales in January 2024 — the first such drop in over a decade. Increased competition from manufacturers like BMW and Volkswagen, as well as China’s BYD, has started to erode Tesla’s market share.
Despite reporting lower-than-expected revenue and profits in the last quarter, Tesla’s stock price rose, demonstrating a resilience that seems unique to the company. “The negative factors that could impact other automakers seem to have little effect on Tesla,” observed analyst Seth Goldstein from Morningstar.
Investors also face the implications of Musk venturing into the political arena. His political endorsements and controversial statements across Europe raise questions about their impact on Tesla’s reputation and potential sales within those markets.
As Musk faces backlash over his political statements, including comparisons to historical authoritarian figures, some analysts wonder if his choices might alienate customers. Felipe Munoz from Jato Dynamics remarked, “It’s difficult to understand why he would choose to risk distancing potential buyers.”
The upward trajectory of Tesla’s stock, which has surged since the elections, now exceeds the annual economic output of 160 countries, bringing its overall market valuation to approximately $1.3 trillion—more than the combined worth of several leading automotive manufacturers.
Musk holds a firm belief that the company’s stock should reach even greater heights, declaring, “I envision a scenario where Tesla is the most valuable company on the planet.” He emphasized that it’s possible for Tesla to be worth more than the sum of the next five companies combined.
Ives concurs, affirming that, with Musk’s ongoing influence on deregulation in Washington, the stock’s trajectory is poised for continued ascension. “Musk made a monumental bet on Trump,” he argued, “and this has the potential to translate into a trillion-dollar opportunity.”
