Tesla's share price witnessed a significant surge of 38% in November.
In a year that left investors underwhelmed, Tesla (TSLA 2.19%) saw its stock soar last month, fueled by hopes that the new U.S. administration would be favorable to the electric vehicle (EV) maker. With CEO Elon Musk having forged a close relationship with President-elect Trump, investors saw an opportunity for regulatory relief.
As the election results rolled in, Tesla's stock skyrocketed, gaining over 38% in November according to S&P Global Market Intelligence data. The chart below illustrates this rise, with the majority of the gains occurring post-election.
Musk and the Trump Tie-In
Musk's public support for Trump during the elections made Tesla's stock surge after the election results. However, it remains unclear how the Trump administration will actually benefit Tesla. Musk is hoping for federalization of autonomous-vehicle regulations, which could help bring the much-anticipated Cybercab to roads. Safety will be the key test here, as allowing such vehicles without meeting basic safety standards could spark public outcry.
Trump's pro-fossil fuel stance and opposition to EVs is another factor to consider. Trump has already expressed intentions to eliminate the $7,500 EV tax credit, a move that could hit Tesla's rivals harder than Tesla itself. Despite this, Musk maintained that the impact on Tesla would be minimal, indicating a less-friendly regulatory environment for the renewable energy sector under the Trump administration.
Tesla's Challenges Ahead
The road ahead for Tesla is not without obstacles. The company's revenues stagnated and quarterly profits dropped for much of 2020. But Tesla managed to surprise investors with solid third-quarter earnings, including strong profit growth.
Tariffs and escalating tensions with China, one of Tesla's major markets, pose potential threats. Meanwhile, high investor expectations, which include expectations for rapid growth in production, self-driving technology, and Trump administration wins, could prove hard to meet.
Realizing the potential challenges and setting appropriate expectations would be wise for investors. The Trump administration's stance may not offer as much aid to Tesla as initially expected, making it crucial for Tesla to adapt to these changing regulatory environments and maintain its competitive edge in the EV market.
Enrichment Sources:1. InvestorPlace2. Investopedia3. Marketwatch4. Bloomberg
Following Musk's public support for Trump during the elections, Tesla's stock saw a significant surge, with a 38% increase in November 2020. (Musk and the Trump Tie-In)
As Tesla navigates the regulatory environment under the Trump administration, the company's focus on federalizing autonomous-vehicle regulations could be key to the rollout of its anticipated Cybercab. (Tesla's Challenges Ahead)
