Tesla's stock rallied 5.01% on Friday, driven by growing optimism that the upcoming Trump administration's policies will create a favorable environment for the electric vehicle (EV) maker's growth and profitability.
One of the primary catalysts behind Tesla's surge was the expectation that the Trump administration plans to cut regulations on autonomous driving. According to reports, President-elect Trump's nominee for Secretary of Transportation, Sean Duffy, has expressed support for self-driving technology, stating it can be "remarkable in keeping our families and kids safe." This development is seen as a major positive for Tesla, which has bet heavily on autonomous driving and robotaxi services but has faced strict regulations hindering its rollout.
Additionally, there are speculations that the Trump administration will sunset the generous EV tax credits introduced by the outgoing Biden administration. While this could initially seem negative for Tesla, analysts believe it will disproportionately impact low-margin EV competitors like Rivian, which has negative profit margins. In contrast, Tesla enjoys significantly higher profit margins of nearly 9%, potentially enabling it to better absorb the impact of reduced tax credits.
Furthermore, President-elect Trump has promised to levy tariffs on foreign countries that impose duties on U.S. products, a move that could shield Tesla from competition entering the U.S. market from Chinese EV makers like Nio.
Beyond policy tailwinds, Tesla's stock also benefited from strong demand for its products, with the recently launched Cybertruck drawing robust sales. Moreover, heavy and unusual bullish call option activity suggested increased institutional interest in the stock, while Tesla's emergence from a massive long-term base structure on the charts pointed to further upside potential.
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