George Glover and Al Root
Tesla stock soared Wednesday with Republican nominee Donald Trump winning the U.S. presidential election.
A Trump victory will very likely mean less support for electric vehicles. It also means more work for already-incredibly busy Tesla, SpaceX, X, and xAI CEO Elon Musk. Slower U.S. EV sales and management distraction are potential overhangs on shares of his EV makers. Investors, however, are focused on the positive.
Tesla stock jumped 14.3% to $287.31 in premarket trading Wednesday, making it the biggest premarket winner of all the stocks in the S&P 500. Futures for the benchmark index were up 2.3%.
The move added about $120 billion to Tesla's stock market value, pushing it above $900 billion for the first time since July 2023, according to FactSet.
The initial surge in Tesla stock came with Trump on course to win the election after the Associated Press called the key swing states of North Carolina, Georgia, and Pennsylvania in his favor. The AP called the race shortly before 6 a.m. Eastern Time after declaring Trump the winner in Wisconsin.
In his victory speech, Trump singled out Musk -- a key campaign ally -- for praise.
"Let me tell you, we have a new star. A star is born -- Elon," Trump said. He added that he'd been amazed by SpaceX's midair rocket catch last month, and claimed the space technology company's Starlink space-based Wi-Fi service had "saved a lot of lives" when North Carolina was hit by Hurricane Helene in late September.
"[Musk is] a character, he's a special guy, he's a super genius. We have to protect our geniuses -- we don't have that many of them," Trump said.
Musk and Trump have also discussed a position for Musk in a second Trump administration with Musk looking at ways to reduce government waste and inefficiency.
Musk doesn't need more to do. He runs several companies and Tesla investors typically hate it when he takes on a new task. Tesla stock was north of $328 when Musk tweeted he had made an offer for then-Twitter, which is now X, on April 14, 2022. Shares finished 2022 at $123 and change.
Investors, however, are used to Musk's multitasking. Musk has also sounded engaged at Tesla this year, with the company set to launch a new lower-priced model and self-driving robotaxi business in 2025.
The threat of distraction also needs to be balanced against benefits from Tesla from a Trump second term. Wedbush analyst Dan Ives said in a research note that a victory for Trump could harm the EV industry as a whole, but boost Tesla shares by $40 to $50.
Trump is likely to reduce or eliminate EV purchase tax credits -- a headwind for all EV makers. Ives, however, said that Tesla has the scale to be profitable without tax credits. Less support also means less competition from traditional auto makers, leading to larger market share for Tesla.
A second Trump term likely means reduced regulations which benefits the nascent Robotaxi business. Regulatory approvals are key to getting that business off the ground on schedule in late 2025.
Along with the White House, Republicans won control of the Senate and likely maintained control of the House of Representatives. Control of all three makes it far more likely that Trump's tax plans will be implemented. Those include corporate tax rate cuts to 15% from 21% -- a benefit for Tesla as well as other U.S. manufacturers.
Election results are moving shares of other car companies. Shares in fellow EV maker Rivian dropped 4.8% in premarket trading. Lucid Group shares fell 0.4%. General Motors and Ford Motor stocks rose 4.8% and 3.9%, respectively. The latter two benefit from slower EV growth -- Ford and GM don't make money selling EVs -- and from lower tax rates.
Write to George Glover at george.glover@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 06, 2024 07:21 ET (12:21 GMT)
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