Tesla’s stock (TSLA) has surged to a $1 trillion valuation – seemingly over the assumption that the Trump and Musk relationship is going to benefit the automaker.
The company is virtually worth more than the next 10 biggest automakers combined.
Tesla has extended its post-election rally another 7% this morning – resulting in its valuation surpassing $1 trillion for the first time in years.
The company has long been the most valuable automaker in the world, but it is now worth more than the next 10 biggest automakers combined:
Considering there has been no significant news concerning Tesla this week other than the US elections, it’s fairly clear that the latest rally is related to the election and the close relationship between Tesla CEO Elon Musk and President Elect Donald Trump.
What is Trump going to do for Tesla?
Tesla added over $200 billion to its valuation since the election. That’s a whole Toyota added to its valuation.
What does justify that? What can Trump do that will help Tesla that much?
It’s hard to tell exactly as what Trump says he will do and what he actually does aren’t always the same things, but there are a few theories.
The President Elect made it clear that he wanted to remove the EV incentives that kept Tesla’s sales from falling in the US over the last few years. This will make Tesla’s vehicles more expensive, but some Tesla shareholders are hoping that it will cripple other EV competition, leaving Tesla alone in the future.
They are expecting something similar with the tariffs that Trump has been promising to impose on goods coming from other countries.
The auto industry is globalized and US automakers rely on parts from other countries, but on average, Tesla is more vertically integrated than other automakers.
While all automotive costs are likely to go up, Tesla investors believe the company will be able to stomach the tariffs better than the competition.
Finally, on the automotive manufacturing front, there’s also the more conspiratorial theory that Trump could carve out exceptions built especially for Tesla now that Musk has his ear.
While automotive manufacturing is still the bulk of Tesla’s business, Musk was clear that he believes that “Tesla is worth nothing without self-driving.” Trump can’t help Tesla achieve self-driving, but Musk has hinted that he could build a federal framework to get self-driving systems approve at the federal level rather than state-by-state.
This would help Tesla more easily roll out when/if it solves self-driving.
Electrek’s Take
They have some good points about Tesla being more competitive than other EV automakers in a harsher cost environment.
Tesla has already proved it during the supply chain crisis amid the pandemic.
My problem with it is that it’s not good for electric vehicles. It’s only good for Tesla. At Electrek, we are for the acceleration of EV adoption in order to help ensure the transportation and energy industries are on an accelerated path to sustainability.
Tesla used to be for that too.
Within a scenario where EV incentives are removed and automotive costs increase due to tariffs, EV adoption goes down in the US. Electric vehicles will be more expensive at the sticker price and historically, that has always resulted in fewer sales.
It’s going to be true of Tesla and all other EV automakers. The only way you can see that as been good for Tesla is if that kills the other automakers and only Tesla survives.
That’s a real possibilities, but it would be bad for the mission to accelerate electric transportation.
It goes against Tesla’s original mission, which was to accelerate the entire industry’s transition.
In a way, it feels like Tesla was early and took advantage of the incentives and as other companies are trying to catch up, Tesla, or rather Musk, aims to close the door behind them. This goes against the original mission.
If that’s really what is going on, Tesla is not mission driven anymore. It has become all about the stock.