What You Need To Know
As President Trump defeated Kamala Harris to win the 2024 presidential election, Tesla's stock rose significantly, gaining up to 15% in pre-market trading, partly due to Donald Trump's proposal to appoint Elon Musk to a role that could influence government spending decisions.
This potential position may positively affect Tesla's operations and overall profitability. Recently, Musk contributed nearly $75 million to the America PAC, which he created to support the Republican nominee. Trump has promised to establish a government efficiency commission led by Musk if elected.
At a Trump rally in late October, Musk asserted his capability to cut the federal budget by $2 trillion. However, some analysts, like Dan Ives from Wedbush Securities, caution that a Trump presidency might adversely impact the electric vehicle (EV) sector due to potential cuts in EV rebates and tax incentives. Despite this, Ives notes that Tesla's significant scale could provide a competitive advantage in an environment with fewer subsidies and possibly high tariffs against Chinese EV brands, which could further benefit Tesla's market position.
Why This Is Important for Retail Investors
Stock Momentum: Tesla's 15% pre-market gain reflects increased investor confidence, potentially translating into higher returns and stock valuation stability.
Government Influence Potential: Musk’s possible government role under Trump could drive favorable federal policies or spending decisions, which might indirectly benefit Tesla’s operational growth and profitability.
Market Position in Subsidy-Free Environment: Tesla’s scale and dominance provide resilience against potential cuts in EV tax incentives, positioning it well to capture market share even if government rebates for EVs diminish.
Protection Against Foreign Competition: Possible tariffs against Chinese EV brands could reduce foreign competition, strengthening Tesla's market share and profitability within the U.S. market.
Cost Efficiency Narrative: Musk's claim to reduce federal spending by $2 trillion could further elevate his influence, appealing to fiscal conservatives and potentially leading to cost-saving measures that benefit companies aligned with such efficiency goals.
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