Wall Street Splits on Tesla's Future with Trump Potentially Re-Elected

Tesla CEO Elon Musk Endorses Trump While Wall Street Remains Divided

Elon Musk, CEO of Tesla, has endorsed Donald Trump's presidential campaign, stirring mixed reactions among Wall Street analysts on its potential impact on the electric vehicle (EV) sector. With a second Trump term possibly altering the landscape, there are significant concerns primarily revolving around the Biden administration's $7,500 EV tax credit. The former president and his allies, such as VP pick J.D. Vance, have long opposed these initiatives. Vance introduced a bill last fall intending to eliminate over $100 billion in EV subsidies and replace them with credits for gas and diesel vehicles.

Debate Over EV Tax Credits

Analysts like Wedbush’s Dan Ives believe revoking EV credits might actually benefit Tesla by widening its technological lead over competitors. Tesla, being the world’s most valuable automaker, is better adapted to an unsubsidized market than newer, cash-burning EV companies. "It’s a big advantage for Tesla and Elon Musk," Ives stated, pointing out Tesla’s unmatched scale and scope.

Conversely, some experts disagree. Ron Jewsikow from Guggenheim sees the potential policy shift as detrimental, calling the EV tax credit a "key affordability enabler" for Tesla. He also highlighted the risks associated with higher tariffs, given Tesla's reliance on Chinese-sourced batteries.

Trade and Tariff Concerns

Wall Street is keenly observing Musk's political moves, especially his endorsement post the failed July 13 assassination attempt. Musk’s support extends to significant financial backing, reportedly committing $45 million per month to Trump’s campaign. Trump’s campaign rhetoric includes a focus on imposing tariffs on Chinese imports, which could escalate the ongoing trade war. The current administration has already raised tariffs to 25% on Chinese lithium-ion EV batteries and parts, further complicating the landscape.

Tom Narayan from RBC highlighted concerns about Trump's unpredictable behavior during his first term, which made the auto industry uneasy. Instances like Trump's 2019 threats to impose tariffs on Canadian aluminum and European goods exemplify the erratic nature that worries automakers.

Uncertain Impact on Tesla

While the exact impact of a potential second Trump term on Tesla remains uncertain, there's a growing consensus that it could slow overall EV adoption and harm the sector. Jewsikow remarked, “It doesn't necessarily sink Tesla's ship, but it does sink some ships. It’s certainly negative for everyone.” Ives echoed this sentiment, stating that a Trump presidency would be especially challenging for General Motors and Ford, hindering broader EV transformation efforts.

This debate comes at a time of shifting sentiment toward Tesla, with the company's stock experiencing significant fluctuations. Better-than-expected performance led to an 11-day rally before a brief sell-off due to production delays. The stock has surged 40% since June, reflecting heightened investor interest amidst the evolving political and economic landscape.