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Tesla (TSLA) CEO Elon Musk’s embrace of President-elect Donald Trump is paying off for Tesla shareholders today. But the question investors are asking is what that burgeoning relationship will mean for them in the years to come.
Trump, who won in convincing fashion on Election Day, has been tied at the hip to Musk, who has backed Trump both in rhetoric and with big financial commitments.
Musk, the world's richest man, recently added donations totaling $43.6 million to America PAC, his GOP super-PAC in early October. His total known political spend this year is now at over $132 million, as Yahoo Finance reported.
That’s one of the largest sums dedicated to a political candidate and a party. In response Trump has even promised Musk a position in his administration, suggesting Musk could head a commission to boost government efficiency.
Trump referenced Musk during his election victory speech early Wednesday morning, calling him a "super genius” and claiming that "we have to protect our geniuses. We don't have that many of them."
But Trump and Musk’s relationship hasn't always been so rosy. It was only a couple of years ago, in 2022, when Trump denigrated Musk on Truth Social, the conservative rival social media platform to Musk’s Twitter (now X).
“When Elon Musk came to the White House asking me for help on all of his many subsidized projects, whether it’s electric cars that don’t drive long enough, driverless cars that crash, or rocketships to nowhere, without which subsidies he’d be worthless, and telling me how he was a big Trump fan and Republican, I could have said, “Drop to your knees and beg,” and he would have done it,” Trump wrote.
This was in response to Musk saying that Trump was too old to run for president again. Musk had purchased Twitter earlier that year and invited Trump to return to the platform, along with many other figures who were banned for offensive viewpoints.
Musk is an environmentalist and believes humanity must move beyond fossil fuels in order to save the planet — and if that means people should buy Tesla's electric vehicles, then he’s all for it. Trump is an unabashed fossil fuel fan and has big plans to open up drilling and reverse emissions rules and subsidies for clean energy.
But Musk’s embrace of free speech, deregulation, and anti-woke policies pushed him closer to Trump and the GOP. A snubbing by President Biden at an EV summit stung Musk, who many feel did more than any single person to bring EVs to the mainstream in the US.
It was Trump’s near assassination attempt in July that sealed the deal for Musk. He wrote on X shortly after the shooting, “I fully endorse President Trump and hope for his rapid recovery.”
The two have been increasingly connected ever since.
While Musk is in charge of companies like SpaceX (which includes Starlink) and the aforementioned X, Tesla investors have the most to gain — or lose — from Musk's ties to Trump.
Trump has said in the past that EVs are a “hoax” and that an EV transformation will destroy the US auto industry and kill US jobs. He has also promised to reverse Biden's EV policies upon a return to office.
The Biden administration’s signature climate law, the Inflation Reduction Act, introduced the $7,500 EV tax credit for consumer vehicles, including numerous others for commercial EVs and battery production, among other things.
With Trump in the White House and a GOP-led Senate and perhaps House of Representatives, that massive boon for the EV industry and Tesla could be under threat.
“I’m all for electric cars but you have to have all of the alternatives also,” Trump said in an interview in March. “First of all, they don’t go far, they cost too much, and they’re all going to be made in China,” he said.
“You can’t just go to electric," Trump said, adding that the grid isn't up to the challenges of production and distribution.
But Trump changed his tune as recently as August. “I’m for electric cars. I have to be, you know, because Elon endorsed me very strongly. ... So I have no choice,” Trump said during a rally.
“[Trump is] not necessarily a big supporter of the concept of a government-led transition to EVs,” iSeeCars analyst Karl Brauer told Yahoo Finance. “So it's interesting to see that people feel like Elon's relationship with Donald Trump will overcome a potential shift in policy because I do think the EPA regulations and expectations for electric vehicle sales and market share are not realistic.“
Brauer believes the US will reassess and likely roll back stringent EPA emissions requirements and federal EV tax credits, which would be a negative for EV companies, including Tesla.
But, given Tesla's competitive advantages in the EV space, this could actually be a positive for the company.
"Tesla has the scale and scope that is unmatched in the EV industry, and this dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players (BYD, Nio, etc.) from flooding the US market over the coming years," Wedbush’s Dan Ives wrote in a note earlier today.
"We believe a Trump win could add $40-$50 per share to Tesla's stock," Ives added, noting that the company could exceed $1 trillion in market cap "if autonomous/FSD is accelerated starting in 2025."
Indeed, Tesla’s robotaxi ambitions, though nascent and in the early testing phase, could be supercharged by a Trump White House.
“We believe Trump's victory will help expedite regulatory approval of the company's autonomous driving technology,” CFRA’s Garrett Nelson wrote on Wednesday.
Nelson hiked his Tesla price target considerably to $375 from $265 and upgraded the stock to Buy following the election, adding that the potential removal of the EV tax credit would actually widen Tesla’s "competitive moat” due to Tesla’s cost advantage in making EVs.
The robotaxi gambit is a bit more nuanced, as Tesla is behind competitors like Google’s (GOOG, GOOGL) Waymo and GM’s (GM) Cruise, Brauer said.
Brauer added Tesla stock has pretty much tapped out all it can from the traditional auto business; Musk needs to find the “next big thing” to unlock tremendous value for Tesla shareholders — and that’s the robotaxi and self-driving tech.
And Trump could help those initiatives.
“Now will Trump be supportive of those technologies? More so than the previous administration? Probably," Brauer said. "I don't think the previous administration was a glowing fan of Elon, so 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, and maybe that's among the things that investors are hoping for.”
Tesla sees robotaxi testing continuing in 2025 and a rollout as early as 2026. Perhaps with Trump and new regulators installed, Tesla’s Cybercab robotaxis will be on the streets sooner than many think.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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