Tesla CEO Elon Musk is throwing his support behind Donald Trump’s presidential campaign, but a potential second term has left Wall Street divided over whether it will be a boon or a bummer for the electric automaker .
At the heart of the debate is Biden’s $7,500 tax incentive for EVs. The former president, his running mate JD Vance and a number of their Republican colleagues have long opposed Biden’s EV initiatives. Senator Vance introduced the Drive American Act last fall, aimed at eliminating over $100 billion in existing EV subsidies and replacing them with credits for gas or diesel vehicles.
Still, a return to EV credits could help Tesla ( TSLA ) “widen the gap and technological advantage” over its rivals, Wedbush’s Dan Ives told me. The world’s most valuable automaker is better positioned in an unsubsidized environment than newer electric vehicle companies burning through cash.
“It’s a huge advantage for Tesla and Elon Musk,” Ives said, adding that Tesla’s scale and reach are “unparalleled.”
But not everyone on Wall Street is buying the argument that a Trump presidency is positive for Tesla.
Guggenheim’s Ron Jewsikow told me he “tries” to see it as anything but a negative, calling the EV tax credit a “key enabler of affordability” for Tesla.
Jewsikow also noted the risk of higher tariffs, as Tesla, like other automakers, uses batteries of Chinese origin.
Wall Street is closely following Musk’s support for Trump. Musk, who endorsed Trump shortly after the July 13 failed assassination attempt, wrote in a post on X that Trump’s VP pick is a “great decision,” adding later that a Trump-Vance ticket “sounds like a win.” .
He also reportedly plans to pledge $45 million a month to support the former president’s bid for the White House.
Throughout Trump’s campaign, he has proposed imposing a 60% tariff on all Chinese imports, a move that is likely to escalate the ongoing trade war. This compares to the current administration’s recent decision to raise the tariff to 25% on Chinese lithium-ion EV batteries and battery parts.
Talk of Trump’s tariffs has caught the eye of others on Wall Street as analysts weigh the implications of a Trump presidency for the auto sector beyond Tesla.
RBC’s Tom Narayan told me that Trump’s “erratic” behavior during his first four years in office has left the auto industry worried, and many automakers see his past threats as a potential challenge to business theirs if he were to be elected for a second term.
“In 2019, he threatened to put tariffs on Canadian aluminum and that scared everyone, but he never ended up doing it. And then he threatened to impose tariffs on Europe. It is the messy nature of threats that the auto industry does not like,” said Narayan.
While the exact impact of a Trump presidency on Tesla is still unclear, there is a growing consensus that a second term is likely to slow EV adoption and hurt the sector overall.
“It doesn’t necessarily sink Tesla’s ship, but it sinks some ships. Of course it’s negative for everyone,” Jewsikow said.
This sentiment was echoed by Ives. “Trump would be negative about Detroit and the EV transformation of GM ( GM ) and Ford ( F ),” he said. “And a headwind against major EV players not named Tesla.”
The debate about the impact of the election comes amid changing sentiment toward Tesla. Better-than-expected shipments in the second quarter sparked an 11-day rally in the stock before shares sold off briefly this week following reports the company delayed unveiling the robotax until the fall.
The stock is up 40% since the start of June.
Sean Smith is an anchor on Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Advice on deals, mergers, activist situations or anything else? Email seanasmith@yahooinc.com.
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