Trump Revokes Pro-EV Policy, Tesla Stock Falls

Trump Revokes Pro-EV Policy, Tesla Stock Falls
Tesla (TSLA) stock experienced a downturn of up to 3% on Tuesday, reversing premarket gains on the first trading day after Donald Trump’s inauguration as President. This decline followed the President’s decision to revoke an executive order implemented by former President Joe Biden, which mandated that half of all new US cars be electric by 2030.
Other EV Stocks Decline, GM and Ford Rise
The news of the policy reversal sent shockwaves through the electric vehicle (EV) industry. Other EV stocks such as Lucid (LCID) and Rivian (RIVN) plunged by nearly 7% and 5%, respectively. Conversely, stocks of traditional automakers General Motors (GM) and Ford (F) gained in value.
Trump Targets EV Subsidies and Market Distortions
In addition to revoking the EV mandate, President Trump directed his administration to consider eliminating “unfair subsidies” and “other ill-conceived government-imposed market distortions” favoring EVs. This move came despite the Biden administration’s efforts to bolster the EV industry through grants and tax credits under the Inflation Reduction Act.
Musk Downplays EV Tax Credit Loss, Focus on Autonomy
Tesla CEO Elon Musk, a confidant of President Trump, expressed confidence that his company would weather the policy changes. However, Musk acknowledged that the loss of the EV tax credit, which provides consumers with a $7,500 incentive, is not insignificant. Despite this, Musk believes that Tesla’s focus on autonomous driving technology will ultimately benefit the company in the long term.
Tesla Rallies Despite Recent Sales Decline, Analyst Raises Price Target
Despite the decline on Tuesday, Tesla shares have experienced a significant surge in recent weeks, largely driven by speculation known as the “Trump trade.” The stock has gained over 60% since Trump’s election victory in November, despite Tesla reporting a decline in annual sales in January. Analysts remain bullish on Tesla’s future, with Piper Sandler analyst Alexander Potter raising his price target to $500. Potter believes Tesla will prioritize popularizing its Full Self-Driving (FSD) software rather than releasing new EV models.
Challenges for Tesla’s Autonomous Driving Software
While the autonomous driving market holds potential for Tesla, the company faces challenges in this area. FSD still requires a human driver, and its contribution to Tesla’s earnings is limited. Moreover, federal regulators have launched investigations into the software following a series of crashes.
Tesla Bulls Hope for Trump’s Support on Autonomy
Some Tesla investors are optimistic that President Trump will create a more favorable regulatory environment for autonomous driving. Wedbush analyst Dan Ives predicts that Trump will “clear the federal regulatory spiderweb” around Tesla’s FSD software.
Tesla to Report Q4 Earnings
Tesla is scheduled to release its fourth-quarter earnings results on January 29. The company’s future performance will be closely watched in light of the recent policy changes and its ongoing efforts to advance its autonomous driving technology.