Elon Musk’s Big Bet on Trump: What’s at Stake for Tesla, SpaceX, and X

Source: euronews.com

Elon Musk has taken a strong stance in support of Donald Trump’s successful campaign for the U.S. presidency, emerging as one of the most prominent business figures backing Trump. Musk’s substantial financial support and his vocal advocacy for Trump have left him and his business empire in a unique position, with both potential gains and significant risks as Trump begins his new term.

Musk’s contributions to Trump’s campaign efforts were notable, with donations amounting to nearly $119 million, directed to a political action committee Musk established for this purpose. Musk’s high-profile support didn’t stop there. He hosted an interview with Trump on his social media platform, X, and made appearances at rallies with Trump in the final weeks before the election. Analysts like Daniel Ives from Wedbush Securities noted Musk’s strong commitment, characterizing his support as a big bet.

Tesla Surges with Trump’s Win

Early Wednesday, Tesla stock surged, rising 13% immediately after the election results and closing with a nearly 15% gain by the end of regular trading. The tesla stock increase was a major win for Musk, who owns 411 million Tesla shares. This rapid boost in share price, up from a two-year low, generated an increase of over $15 billion for Musk’s Tesla holdings, representing an enormous return on his $119 million campaign support investment.

However, there are notable risks as well. Tesla’s growth has historically benefitted from federal support for electric vehicles (EVs), including tax credits and loans designed to encourage EV production and adoption. Although a Harris presidency would have likely sustained or expanded this federal support, Trump has previously been vocal about his skepticism toward EVs, claiming they are costly and harmful to the traditional American automotive industry. While Tesla could face a reduction in federal support, Musk has expressed confidence that cutting subsidies would actually benefit Tesla by challenging legacy automakers and reinforcing Tesla’s competitive edge.

Impacts on Self-Driving Technology Approval

Trump’s administration could influence the regulatory framework for self-driving vehicles, potentially accelerating approvals for autonomous technology—a significant benefit for Tesla as it advances its Full Self-Driving (FSD) technology and develops plans for a robotaxi fleet. Some industry analysts believe Trump’s administration could slow investigations related to the safety of Tesla’s Autopilot and FSD systems, currently being scrutinized after several high-profile accidents. This could potentially speed up Tesla’s efforts to bring true self-driving cars to market.

Garrett Nelson of CFRA Research noted that Trump’s presidency might be advantageous for Musk and Tesla in this regard, expediting regulatory approval for autonomous driving technology. As a result, CFRA has upgraded its recommendation for Tesla stock from Hold to Buy, with a 12-month price target increase to $375 per share.

The EV Market in Flux: Potential Risks and Changes

Trump’s victory could significantly change the EV landscape in the U.S. Current government incentives, such as the $7,500 tax credit for EV buyers and various federal loans for EV-related manufacturing, are likely to be reduced or removed. Trump could direct the Treasury Department to restrict or eliminate the tax credit altogether, especially if he gains support from a Republican-controlled Congress. However, even with regulatory changes, Musk believes Tesla will retain a competitive advantage.

Notably, Ford’s CEO Jim Farley has expressed the need for automakers to continue investing in EVs, irrespective of the presidential administration. Automakers are under pressure to comply with environmental regulations in other regions, such as Europe and Asia, which could keep EV production and sales growing even if Trump eases U.S. emissions standards. Consumer demand for EVs remains strong, adding further resilience to the market.

Trade and China: A Potential Downside for Tesla

A more challenging element of Trump’s presidency could be a renewed focus on trade tensions with China. Musk’s Shanghai plant is central to Tesla’s production and sales strategies, especially with over 40% of Tesla’s global deliveries coming from the Chinese market. A potential trade dispute could affect Tesla’s operations and profitability in the region.

According to Ives, Musk and Tesla might face significant challenges if Trump’s administration takes a tougher stance on China. If Musk is called to lead Trump’s efforts in reducing government spending or waste, this could also become a distraction from Musk’s day-to-day focus on Tesla stock business operations, which could be concerning for Tesla investors.

Limited Impacts on SpaceX and X

While Musk’s EV business faces various uncertainties, his other major enterprises—SpaceX and X—are likely to see fewer immediate impacts from the new administration. SpaceX, which competes with Boeing, will likely continue its government partnerships, particularly with NASA, under the new administration. X, Musk’s social media platform, has faced criticism, especially from Democrats, over concerns about misinformation. However, government action against X has remained limited, and this is expected to continue under Trump’s administration.

Although Musk’s outspoken support for Trump has created potential opportunities for his companies, it also introduces substantial challenges and risks. From regulatory shifts to trade policy changes, Musk’s high-stakes involvement in this election could have far-reaching consequences for Tesla stock trajectory, self-driving technology developments, and the broader EV market in the years ahead.