Having initially positioned himself as an ally of the American car industry but an opponent of the electric vehicle (EV) sector, Donald Trump quickly caused significant speculation on what his reelection would mean for the biggest player in the field, Tesla Motors (NASDAQ: TSLA).
More recently, a political alliance between the long-time Democrat, Elon Musk, and the Republican candidate has reignited the debate and moved it more on the bullish side as Trump softened his stance on EVs after receiving tens of millions from the South African-Canadian-American billionaire.
Still, the actual fate of TSLA stock in the wake of a possible Republican victory depends, in many ways, on how Tesla is viewed as a company.
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On the one hand, Vice President Kamala Harris would likely be more beneficial for the entire EV industry – and for Tesla as the biggest such company in the collective West – as the Democratic Party has been far keener on pushing a green transition.
Such an argument becomes particularly pointed out once the fact that many of Musk’s companies have benefited heavily from government contracts, subsidies, and stimuli, receiving a total of $4.9 billion already by 2015.
This setup would mean that a Republican administration – more concerned with the ‘drill, baby, drill’ slogan than the climate catastrophe – could take a toll on Tesla.
Additionally, Trump’s love of tariffs – which is, per some interviews, greater than Trump’s love for love – could impose new headwinds on Tesla due to the company’s global supply chains and international production.
How TSLA stock could benefit from Republican EV skepticism
Still, as has been noted for months, this same approach could also help Tesla by harming the company’s competitors more – Elon Musk’s EV maker is sufficiently large to have greater resources for dealing with new circumstances and benefits more of the economy of scale.
More broadly, on the other hand, Musk and Tesla could benefit from the Republicans’ striving to deregulate as the billionaire firms are not only working with and benefitting from federal agencies and government entities but are also involved in numerous disputes with them.
The most recent – and possibly the most important – is the investigation into a pedestrian death by a car with Tesla’s full self-driving (FSD) engaged.
Musk’s common ‘move fast, break things’ approach could also benefit from one of the most ambitious and controversial projects that may gain traction under a second Trump administration: Project 2025.
Could a Trump administration remove all of Tesla’s regulatory issues?
Perhaps the most impactful tenets of the initiative – particularly for a company and an executive engaged with labor, regulatory, and many other disputes – involve the so-called ‘unitary executive theory’ and the questions about the constitutionality of the ‘fourth branch’ of the government.
In very broad strokes, the ‘unitary executive theory’ emphasizes Presidential power and argues that the President of the United States has sole authority over the executive branch. Given the close relationship that is developing between Elon Musk and Donald Trump, an implementation of the theory could heavily benefit the ventures of Tesla CEO.
Simultaneously, the other important tenet seeks to reject the ‘fourth branch,’ the vast bureaucratic apparatus that runs the U.S.’ day-to-day operations.
In practice, it would seek to rein in or abolish the many independent agencies – mostly made to enforce various acts of Congress – such as the Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC), and the National Highway Traffic Safety Administration’s (NHTSA).
Given the number of disputes Tesla and Musk’s other companies are involved in with such agencies, the implementation of at least some parts of Project 2025 could indeed benefit TSLA stock.
The notion is further reinforced by Elon Musk’s likely role in the potential Trump administration at the helm of the proposed Department of Governmental Efficiency (D.O.G.E.).
Furthermore, restructuring or axing independent agencies could help the billionaire come slightly closer to fulfilling his boast that he could lower government spending by $2 trillion each year under a Republican presidency.
Why Elon as the top D.O.G.E. could lead to a short-term rally and a long-term slump
Moving beyond the radical projects to reshape the U.S. and pivoting to an alternative view of Tesla – one that positions TSLA as a meme stock – it is likely that a Trump reelection would indeed help propel the EV maker’s shares higher.
Historically, Elon Musk’s comments and public actions have had a notable impact on TSLA stock price, and his proximity to Trump – both in the public conscience thanks to the campaign endorsement and the literal closeness as the head of D.O.G.E. – would bolster the billionaire’s visibility and prestige even further, likely improving investor sentiment.
However, it could also serve as a double-edged sword. Musk’s public visibility has not always been positive for TSLA’s stock market performance, and, in the long run, his possible role in the potential administration could either help or harm the EV maker.
Ultimately, there are many bearish and bullish arguments for Tesla shares in the long run in the case of a Trump reelection.
In the short term, on the other hand, a Republican victory is almost guaranteed to trigger a TSLA rally due to the billionaire’s closeness with the candidate and due to the popular – and arguably wrong – perception that the market does better under the GOP.
Furthermore, if Trump wins, Tesla’s stock could see a short-term rally, potentially reaching $280–$300 in the initial months, boosted from investor confidence tied to Trump’s deregulatory policies and Musk’s heightened visibility as a close ally in a high-ranking advisory role as well as whole tariffs on Chinese EVs
Tesla stock price chart
Whatever the aftermath of the election may be, there is little doubt that Tesla stock has been doing relatively well in the leadup to it. In the last five days, it rose 3.81% to the TSLA press time price of $257.71.
Additionally, despite the 1.66% correction in the last 24 hours, Tesla shares remain mildly in the green in the year-to-date (YTD) chart in late October, marking a positive shift from their state through much of 2024.
Still, it is worth pointing out that the primary driver of this upsurge has been the EV maker’s third-quarter (Q3) earnings report – which came in significantly better than expected despite not beating all expectations.
Featured image:
kovob. Elon Musk businessman silhouette on Tesla presentation, Logo of company on red background. NEW YORK, USA, 2. OCTOBER 2022. Shutterstock, November 2, 2022. Date retrieved: October 30, 2024
