Elon Musk has played a significant role in supporting former US President Donald Trump’s recent election victory. The billionaire, known for his entrepreneurial ventures, donated approximately $180.97 million (USD $119 million) through a political action committee. This significant financial backing demonstrated his strong endorsement, as did his appearance at Trump rallies and an interview on X, his social media platform.
Musk’s strategic involvement raised eyebrows in both political and business circles. “He’s bet big here. He dove into the deep end of the pool on this election,” said Daniel Ives, a tech analyst at Wedbush Securities. This political move has had immediate effects on Musk’s key asset, Tesla (TSLA). Early on Wednesday, Tesla shares surged by 13 per cent, boosting Musk’s wealth significantly. The increase in the Tesla stock price added over $19.77 billion to his net worth, enhancing the value of the 411 million shares he owns.
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What Trump’s Win Means for Tesla
Trump’s return poses both opportunities and challenges for Tesla. While Trump’s administration may reduce federal support for electric vehicles (EVs), Musk remains optimistic. “Take away the subsidies. It will only help Tesla,” he posted on X in July. Tesla’s existing global sales saw a dip of 2 per cent in the first nine months of this year, attributed to rising competition. Despite this, Tesla’s profit and sales rebounded in the third quarter.
Trump has criticised EVs, labelling them as too costly with limited range and potential job loss for the American auto industry. His plans include ending what he calls “Biden’s EV mandate,” despite no such mandate existing. Under President Biden, government support for EVs included billions of dollars in loans and a $11,400 (USD $7,500) tax credit for many electric car buyers. Industry experts anticipate that Trump will cut these programs or amend Treasury Department rules to limit tax credit availability.
However, Trump’s policies might still indirectly benefit Tesla. Government funds supporting EV manufacturing often target southern states, creating jobs that could align with Trump’s agenda. Garrett Nelson, an analyst at CFRA Research, said, “Tesla and Musk are the biggest winners from the election result.” Nelson raised his recommendation on Tesla stock to “Buy” and increased the 12-month price target to $USD 375 per share.
Regulatory Changes and Self-Driving Technology
Trump’s return could also accelerate approval for Tesla’s autonomous vehicle technologies. The company’s Full Self-Driving (FSD) feature has faced scrutiny from federal regulators due to safety concerns and accidents. Analysts like Daniel Ives believe Trump’s administration could lessen regulatory pressure. “Under Trump, those investigations could slowly disappear,” said Ives.
Musk’s vision of a self-driving fleet, including robotaxis, could find a favourable environment in Trump’s administration. While these innovations face hurdles, eased regulations could facilitate their launch.
Broader Implications for EVs
Traditional automakers, including Ford and General Motors, have expressed their commitment to continuing EV production despite political shifts. Ford CEO Jim Farley stated, “It is not a strategy where we handicap the presidential election. The only way we believe to be enduring is to make money on small EVs.”
Many companies remain focused on meeting international environmental standards. Even if Trump modifies EPA rules in the US, automakers must still comply with stringent regulations in Europe, Asia, and states like California. This dual reality ensures that EV production remains a long-term strategy for the industry.
Musk’s Personal Gains and Risks
Musk’s net worth, heavily tied to Tesla stock, now stands to benefit from Trump’s return. Analysts highlight that Musk’s calculated risk has yielded substantial returns. But there are risks for Tesla, too. Reduced incentives could lead to slower EV adoption, impacting the broader industry. However, Tesla, with its established market position, might weather the storm better than newer competitors.
Musk took to X to celebrate Trump’s victory, writing, “The people of America gave @realDonaldTrump a crystal clear mandate for change tonight.” This public alignment with Trump solidifies Musk’s reputation as a politically engaged business leader.
Conclusion
Elon Musk’s substantial investment in Trump’s presidential campaign has already delivered significant financial gains through Tesla shares. While the end of some government support for EVs could pose challenges, Musk’s strategic positioning suggests he is prepared for a new chapter under Trump’s administration. Tesla’s leadership in the EV market, coupled with potential regulatory easing, may strengthen its dominance. However, as political and market dynamics evolve, Musk’s gamble could either solidify his empire or test its resilience.
