Implications of Elon Musk Backing Donald Trump on Tesla Stock Implications of Elon Musk Backing Donald Trump on Tesla Stock

Written By Michael Gary Scott

Elon Musk, the CEO of Tesla (TSLA), has publicly supported Republican nominee Donald Trump for the upcoming 2024 U.S. Presidential elections. This unexpected alliance has sparked concerns among investors regarding the potential impact on Tesla’s stock price. Musk, at the helm of the largest electric vehicle (EV) company globally, is risking more than just his own reputation by associating himself with Trump, whose controversial views on climate change and EV incentives clash with Musk’s eco-conscious brand.

Trump’s history as a climate change skeptic coupled with his decision to withdraw the U.S. from the Paris Climate Agreement during his previous presidency presents a stark contrast to Musk’s pro-climate stance. Musk, previously part of Trump’s economic advisory council, distanced himself from the administration following Trump’s climate policy decisions. However, the tables have turned, and Trump has hinted at offering Musk an advisory or cabinet role in his administration should he be re-elected, a proposition that Musk seems open to accepting.

Trump’s Threat to EV Tax Credits

Trump’s vocal opposition to climate change and EV incentives raises concerns for the EV industry. He has mentioned plans to revoke EV mandates and potentially abolish EV tax credits that were expanded under President Biden’s term. While Tesla’s earlier models didn’t qualify for EV tax credits, the company became eligible following the Inflation Reduction Act of 2022. Should Trump roll back these incentives, it may not just impact Tesla but the entire EV sector.

Musk’s Political Shift and its Effect on Tesla

Musk’s noticeable drift toward right-wing ideologies has alienated some liberal EV consumers from Tesla, a fact supported by recent surveys. Beyond the loss of some left-leaning buyers, Tesla faces a broader concern of diminishing EV sales overall. The uncertainty surrounding Trump’s stance on autonomous driving, a vital aspect of Tesla’s value proposition, adds a layer of complexity to the situation.

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Seeking Influence Through Trump

Musk’s friction with the Biden administration, particularly his exclusion from high-profile EV discussions, prompted his endorsement of Trump. By aligning himself with the former president, Musk aims to secure a seat at the policy-making table in a potential Trump administration. With Tesla’s significant market share in the EV industry, Musk hopes to protect the company’s interests and soften any adverse policy changes under a Trump regime.

Focus on AI and the Future of Tesla

Aside from EV policies, Musk’s interest in the next administration’s AI regulations is palpable. Trump’s plans to repeal Biden’s AI Executive Order align with Musk’s endeavors in AI technology, a sector he believes will drive substantial value for Tesla and its investors. Musk’s AI ventures, notably xAI, hold promise for future growth, bolstering his strategic backing of Trump.

Risks of Supporting Trump for Tesla

Despite the potential gains, Musk’s overt support of Trump carries inherent risks. Trump’s unpredictable nature and his history of volatile decision-making could unsettle Tesla’s stability. Moreover, Trump’s confrontational stance on trade with China could disrupt Tesla’s operations, particularly its profitable factory in the country. Balancing these risks against possible rewards remains a precarious task for Musk and Tesla.