The postelection rally continued, but Tesla Motors stock dropped on Monday after California proposed a new EV credit that could exclude Elon Musk’s auto company. With shares of Tesla already reflecting a lot of good news following the election, the news might have been all that was needed for investors to take profits.
Tesla stock closed down 4% at $338.59 on Monday despite trading at almost $362 early in the day. The S&P 500 and Dow Jones Industrial Average added 0.3% and 1%, respectively.
There wasn’t a lot of Tesla-specific news to pin the early optimism on. No Wall Street upgrades or downgrades. Bloomberg reported that Rivian Automotive and Tesla were settling a lawsuit over EV technology. That settlement isn’t likely enough to move Tesla stock all that much. Rivian and Tesla didn’t immediately respond to requests for comment.
But after the open of trading, California Gov. Gavin Newsom said that the state would provide EV credits if the Trump administration canceled them. But Newsom’s proposal would also “include changes to promote innovation and competition in the ZEV market,” a line that suggests the state would try to limit the credits to smaller market shares than Tesla. Rivian shares added 13%, closing at $11.60 on Monday.
California typically accounts for about 11% or 12% of new car sales in the U.S., in line with its population. Californians favor EVs. In the third quarter of 2024, Californians purchased 115,897 zero-emission vehicles, most of which are battery electric cars, representing 26.4% of all new vehicle sales in the state.
How Tesla would be excluded is not exactly clear, but wouldn’t be difficult. Today’s federal tax credits include qualifying criteria based on the price of the vehicle and the income of buyers, among other things. The governor’s office didn’t immediately respond to a request for comment. Tesla CEO Elon Musk wasn’t happy about the idea, tweeting, “this is insane,” and pointing out Tesla makes cars in California.
As for most stocks, markets generally appear happy with President-elect Trump’s pick for Treasury, fund manager Scott Bessent. “Investors viewed Trump’s selection of hedge fund veteran [Bessent] as a safe-hands candidate who favors a more gradual approach to implementing trade restrictions, mitigating the risk of a more unorthodox candidate,” wrote Future Fund Active exchange-traded fund co-founder, and Tesla shareholder Gary Blackon Monday morning.
Coming into Monday trading, Tesla stock was up about 42% year to date, and up about 40% since the Nov. 5 presidential election. Musk backed Trump’s campaign.
Including premarket trading, postelection gains have added about $350 billion in market value to Tesla stock. That is more than the combined market values of Toyota, Ford Motor, and General Motors, according to FactSet.
Investors expect the Trump-Musk relationship to benefit Tesla, possibly with a national standard governing self-driving cars, making it easier to launch autonomous taxi service.
Wall Street hasn’t put numbers on any benefits yet. Earnings-per-share estimates for the auto maker in 2025 and 2026 are $3.30 and $4.20, respectively, according to FactSet, similar to estimates before the election.