Sour Tesla-Trump Relationship Could Hammer TSLA Stock
Tesla Motors Inc (NASDAQ:TSLA) stock has taken an absolute beating since Donald Trump emerged victorious in the U.S. presidential election, with the stock dropping 8.5% since Trump’s win on November 8.
This is leading some to question whether the electric car company can thrive under the new administration. The Tesla-Trump relationship could be good or bad for the electric car company, depending on which policies Trump follows through on.
Obviously, the President of the United States has a number of tools at his disposal to affect Tesla’s future for ill or good, should he choose to exercise these powers. The Tesla-Trump connection could be one of the more significant tech interactions going forward. Here’s a couple of ways that President Trump could push TSLA stock one way or the other.
Currently, the U.S. provides a federal electric vehicle tax credit. If you were to purchase a plug-in or electric vehicle, for instance, you are then eligible for a $7,500 federal tax credit until the automaker you purchased it from has sold 200,000 units. If the sales numbers are reached, the credit is partially phased out at first, with a complete phaseout occurring 12 months later.
The current sales projection for Tesla, based on historical data, has the company hitting its 200,000 limit in Q3 2018 (assuming “Model 3” production stays on track). After that, buyers of a Tesla vehicle will receive only a partial credit, followed by no credit a year later. But, with a newly elected President Trump, a change to the federal electric vehicle program could render the Model 3—Tesla’s most affordable offering to date, priced at $35,000 before incentives—less appealing when it releases next year. (Source: “TSLA Stock: Can Tesla Motors Inc Prosper Under Trump Administration?” Amigobulls, November 14, 2016.)
Ultimately, if a Trump administration chooses to repeal the credit, this could harm Tesla’s sales figures for its most consumer-friendly product yet, and impact TSLA stock.
To make matters worse, SolarCity Corp (NASDAQ:SCTY), another company helmed by Elon Musk and set to merge with Tesla, is also reliant on government subsidies to help motivate purchases. Again, a reduction or abolition of these subsidies will more than likely prove harmful to TSLA stock, as it will most likely lead to a decline in sales.
SCTY stock is also down 4.3% today.
On the other hand, there’s one major area that a Trump presidency could help these companies: manufacturing.
With Trump’s repeated attacks levied against trade deals such as the NAFTA and the current U.S. treaties with China, TSLA stock could benefit from tariffs. Between SolarCity’s acquisition of Silevo, Inc., a solar panel manufacturer with a factory in Buffalo, NY, and Tesla’s “Gigafactory” in Nevada and automotive manufacturing facility in California, a renewed focus on domestic production under Trump could be a boon to TSLA stock and Tesla sales.
Expect to see more Tesla-Trump stories going forward as the Trump administration begins fleshing out and implementing policies.