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President-elect Donald Trump announced the creation of a new “Department of Government Efficiency (DOGE),” to be led by Tesla CEO Elon Musk and entrepreneur-turned-politician Vivek Ramaswamy. The announcement comes as Tesla shares have surged roughly 35% since November 4, pushing the electric vehicle maker back into the trillion-dollar club for the first time since 2022.
The dramatic rally, triggered by former President Donald Trump’s election victory, has added more than $50 billion to CEO Elon Musk’s wealth through his 13% stake in the company, marking one of the most significant wealth increases in corporate history.
The New Power Alliance
The meteoric rise in Tesla’s stock reflects Wall Street’s bet on the deepening alliance between Trump and Musk, a relationship that has transformed from public antagonism to close partnership. Musk’s recent $43.6 million donation to America PAC in October, bringing his total political spending this year to $132 million, has cemented their alliance, according to Yahoo Finance reports.
“Tesla has the scale and scope that is unmatched,” says Wedbush analyst Dan Ives. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment.” Ives projects Trump’s victory could add “$40-$50 per share to Tesla’s stock” and believes the company could exceed its trillion-dollar valuation if “autonomous/FSD is accelerated starting in 2025.”
The transformation of the Trump-Musk relationship has been remarkable. In 2022, Trump dismissed Musk as a “bullshit artist” on Truth Social after Musk criticized his age. However, July’s assassination attempt on Trump marked a decisive turning point. “I fully endorse President Trump,” Musk wrote on X shortly after the shooting. The two have been increasingly connected since, with Trump featuring Musk prominently at campaign rallies and praising Tesla’s achievements.
Regulatory Landscape Shift
For Tesla investors, Trump’s victory presents a complex set of opportunities and challenges that could reshape the company’s future. CFRA analyst Garrett Nelson, who upgraded Tesla to Buy and raised his price target to $375, believes a Trump White House could accelerate the company’s autonomous driving ambitions. “We believe Trump’s victory will help expedite regulatory approval of the company’s autonomous driving technology,” Nelson wrote Wednesday.
The National Highway Traffic Safety Administration (NHTSA) is currently investigating Tesla’s Autopilot and “full-self driving” features’ involvement in over two dozen fatal accidents. Industry experts suggest these investigations could take a different direction under Trump. “The specific worry with Musk and NHTSA is that the Trump administration might influence the decisions that civil servants are making to benefit the business interests of Tesla,” explains Matthew Wansley, professor at Cardozo School of Law.
Trade Wars and Supply Chain Implications
Trump’s proposed trade policies present Tesla with both opportunities and challenges. While higher tariffs could protect Tesla from growing Chinese competition, particularly from BYD and Nio, they could also significantly impact the company’s production costs and supply chain.
“If there is a general tariff, the price of those will skyrocket,” warns Matt Mittelsteadt, research fellow at George Mason University’s Mercatus Center. “You can’t re-shore what you can’t make.” Tesla’s supply chain remains heavily dependent on Chinese materials, from steel for the Cybertruck to rare earth metals for semiconductors.
iSeeCars analyst Karl Brauer notes that while Trump’s policies might negatively impact the broader EV industry, Tesla’s established scale and efficiency could give it an advantage. “Tesla has pretty much tapped out all it can from the traditional auto business,” Brauer says. “Musk needs to find the ‘next big thing’ to unlock tremendous value for Tesla shareholders — and that’s the robotaxi and self-driving tech.”
The EV Subsidy Paradox
Counterintuitively, the likely rollback of EV subsidies under Trump might strengthen Tesla’s market position.Tesla benefits from a $7,500 tax credit on electric vehicle purchases, which helps reduce the cost of its cars. In addition, the company earned $1.79 billion from carbon credits last year, as reported in its latest annual report. Tesla sells these credits to other automakers whose fleets fail to meet federal emission standards, as well as to the European Union, California, and China.
Changes to the tax credit for new car buyers or to federal emission standards could affect Tesla’s benefits. However, according to economists and regulatory lawyers, competitors like General Motors and Ford may rely on the credit even more than Tesla does.
“Tesla has the scale and scope that is unmatched in the EV industry,” reiterates Ives. He predicts higher China tariffs would “continue to push away cheaper Chinese EV players from flooding the US market over the coming years.”
Trump’s stance on EVs has evolved significantly. After previously dismissing them as a “hoax” and claiming they would destroy the US auto industry, he recently declared at an August rally, “I’m for electric cars. I have to be, you know, because Elon endorsed me very strongly… So I have no choice.”
Autonomous Ambitions
Tesla’s robotaxi program could see significant acceleration under Trump. The company unveiled its steering wheel-free “Cybercab” concept in October, with testing planned for 2025 and potential rollout in 2026. According to industry insiders, a more favorable regulatory environment under Trump could dramatically speed this timeline.
The company’s testing schedule for 2025 could be expedited, particularly if Trump appoints regulators sympathetic to autonomous vehicle development. “Now will Trump be supportive of those technologies? More so than the previous administration? Probably,” says Brauer. “He may be able to get some help and have an ally in the White House to help him get to that next level beyond electric vehicle sales.”
Manufacturing and Infrastructure
Tesla’s manufacturing operations could face significant changes under Trump’s proposed policies. The company’s factories in Texas and California might benefit from reduced environmental regulations, but potential steel tariffs could increase production costs for the Cybertruck and other vehicles.
“The ceiling for what he could possibly get out of government contracts could be raising,” Mittelsteadt notes, suggesting Tesla might benefit from infrastructure projects and government initiatives under Trump.
Market Response and Future Outlook
Wall Street’s response to the Trump-Tesla alliance has been overwhelmingly positive. The stock’s surge has pushed Tesla’s market capitalization above $1 trillion, a level not seen since 2022. Trading volume has reached record levels, with institutional investors increasing their positions.
CFRA’s Nelson hiked his Tesla price target considerably to $375 from $265, citing potential benefits from reduced regulation and expedited approval for autonomous technology. “The removal of the EV tax credit would actually widen Tesla’s competitive moat due to Tesla’s cost advantage in making EVs,” Nelson wrote.
A portion of investors in Tesla may be factoring in the possibility of Donald Trump being re-elected as U.S. President, seeing potential benefits for the company. These include the electric vehicle (EV) subsidies from the Inflation Reduction Act and the potential for tariffs that could limit Chinese EVs entering the U.S., which may help Tesla maintain its market position. Additionally, if Elon Musk were to advise Trump on autonomous driving regulations, it could expedite the approval of Tesla’s self-driving technologies. However, the actual impact of these developments remains uncertain, and a closer look at Tesla’s financials offers a clearer view of its medium-term outlook.
Tesla’s Q3 2024 results showed an adjusted net profit of $2.505 billion, or $0.72 per diluted share, up 9% year-on-year, exceeding expectations. This was driven by higher vehicle deliveries, improved margins, and cost-cutting efforts. Automotive revenue grew 2% to $20.016 billion, while energy generation and storage revenue surged 52% YoY to $2.379 billion. Tesla’s balance sheet remains strong, with cash totaling $33.65 billion and operating cash flows increasing by 89% YoY to $6.255 billion.
In Q3, Tesla delivered 462,890 vehicles, a 6% increase from the previous year. The Shanghai facility operated at full capacity, contributing to overall output. However, declining average selling prices (ASPs) and rising competition in the EV market have pressured Tesla’s automotive gross margins. Additionally, the company’s expansion into new markets and products, such as the Cybertruck, requires significant capital investments, increasing its debt.
Tesla leads the U.S. EV market with a 51% market share and is well-positioned in the energy storage sector. However, the company faces geopolitical risks, particularly in China, where regulatory challenges and competition from local EV makers could impact operations. Tesla’s ambitious growth targets, including a 20-30% increase in vehicle deliveries by 2025, depend on the successful launch of new models and the expansion of production capacity.
While the potential advantages of a Trump presidency could support Tesla, these benefits come with risks, particularly regarding U.S.-China relations. Tesla’s future success will depend on navigating market conditions, regulatory changes, and geopolitical uncertainties while continuing to innovate in the EV and energy sectors.
