Musk’s Alliance with Trump and Its Impact on Tesla Stock

Elon Musk’s decision to align himself with President-elect Donald Trump is yielding positive outcomes for Tesla investors. The company’s stock surged nearly 15% on Wednesday as market participants consider the future implications of Musk's connection with Trump. Following his victory on Election Day, Trump seems to share a close rapport with Musk.

Recently, Musk contributed $43.6 million to America PAC, a super-PAC aligned with the Republican Party, raising his total political donations to over $132 million this year. In response, Trump has indicated that Musk could play a role in his administration, focusing on enhancing government efficiency. Despite their evolving relationship, it has not always been smooth sailing.

Back in 2022, Trump criticized Musk on his social media platform, Truth Social, asserting that Musk’s businesses would be “worthless” without government support. This criticism came after Musk had remarked that Trump was too old to serve another term as president. However, Musk’s ongoing commitment to free speech, deregulation, and anti-woke policies has drawn him closer to Trump and the Republican party.

After a near-assassination attempt on Trump in July, Musk publicly endorsed him, reinforcing their political alliance. As the CEO of Tesla, SpaceX, and the owner of X (formerly Twitter), Musk’s strengthened relationship with Trump could have major implications for Tesla.

Impact on Tesla’s Future Aspirations

Trump has consistently criticized the Biden administration's push for electric vehicles (EVs) and has vowed to undo policies such as the Inflation Reduction Act, which includes a $7,500 tax credit for EV purchasers. Some analysts worry that this could pose a risk to the EV sector, but they also believe that Tesla's competitive positioning could actually benefit from the absence of federal subsidies. Analyst Karl Brauer from iSeeCars observes that a Trump administration would likely reevaluate strict EPA emissions regulations and federal EV tax breaks, potentially impacting other EV firms while benefitting Tesla.

Dan Ives from Wedbush predicts that a Trump victory could significantly boost Tesla’s stock value, forecasting that the company’s market capitalization could surpass $1 trillion if advancements in autonomous driving technology progress. Tesla’s goals regarding robotaxi technology could gain momentum in a Trump-led administration. Garrett Nelson from CFRA points out that Trump's presidency might fast-track regulatory approvals for autonomous driving, enhancing Tesla's robotaxi plans.

CFRA has upgraded Tesla’s stock to “Buy,” substantially increasing its price target. Although Tesla currently trails competitors like Google’s Waymo and GM’s Cruise in the realm of autonomous driving, Musk’s vision necessitates finding the next major innovation beyond traditional EV products. Analysts contend that the Trump administration may be more favorable to such technologies compared to previous administrations.

Tesla is set to conduct ongoing tests of its robotaxi services through 2025, with potential rollouts starting as early as 2026. With Trump and new regulatory figures in place, Tesla’s Cybercab robotaxis could soon be on the streets, marking a transformative shift for the company and its stakeholders.

Musk, Trump, Tesla