Could President Trump Mean Trouble For Tesla Motors Inc?

Tesla stockBlomst / Pixabay

Tesla was shaken by the victory of Donald Trump in the U.S. presidential election, with its stock dropping sharply. Though Trump has not outlined many environmental policies other than a threat to cancel the Paris Climate Change Deal, he has hinted at removing the EPA standards for fuel efficient car production, reports Inverse.

Will Trump be bad for Tesla?

If this happens, it could be a huge blow for government support of the clean energy industry, including tax credits for customers who purchase electric vehicles. Presently, purchasers can get up to a $7,500 tax credit for buying an electric vehicle because of the Tax Payer Relief Act of 2012, which a condition that the producer has not reached the federally-mandated cutoff of 200,000 cars.

For the Model 3, this credit reduces the cost of the car from $35,000 to $27,500. During the phase-out period, a partial credit would be available even for consumers after that initial cap. Automakers also benefited from the program, as for leased cars, the credit went to the automaker, not the consumer, says Inverse.

Trump has expressed support for the U.S. coal and oil industries; therefore, it seems quite unlikely that his administration will show favor for electric cars. Trump’s tax plan does not mention any incentives for electrical energy. In order for the tax credits to continue, Congress would have to renew the act in 2017.

Election ‘injects new risk’ into clean tech and sustainable energy

Before the U.S. elections, Tesla Chief Executive Elon Musk said, “I don’t think [the risk to Tesla] is very high.”

Musk said that right now, one can go anywhere in the United States on a Tesla Supercharger Network.

However, analysts do not think the same. BMI Research said in a report, “If [zero emissions vehicle regulations] were removed, for example, Tesla Motors would lose a major source of income at a time when it is looking to ramp up its operations in order to launch the Model 3.”

According to Oppenheimer analyst Colin Rusch, Trump’s victory injects new risks into investments in clean tech and sustainable energy companies.

In a research note, the analyst wrote, “[Donald] Trump’s surprise victory last night, in tandem with Republicans maintaining majority control of both houses of Congress, constitutes in our view a material negative for the majority of our stocks under coverage.”

On Wednesday, Tesla shares closed down 2.5% at $190.06. Year to date, the stock is down almost 21%, while in the last year, it is down more than 18%.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com

2 Comments on "Could President Trump Mean Trouble For Tesla Motors Inc?"

  1. The only thing that could save the Coal industry is Electric cars. At least push thier death out a few years

  2. Pretty much everyone expected the $7500 tax credit to go away after the 200k cars so the impact is to Tesla is marginal. Although, there is additional risk in solarcity it might be offset by the fact that they will produce their hardware here in the U.S. so they will have less competition from Chinese panel manufacturers.

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