Commenting on how the Trump/Musk feud is reaffirming the risks around investing in Tesla, Neil Wilson, Investor Strategist at Saxo UK: “Clearly this introduces new risks for TSLA – the argument that Musk’s closeness to Trump was bullish for the stock because the president always promotes his favourites is looking very shaky now. For instance, the assumption was it would mean an easier path for the rollout of robotaxis - that is clearly now very much in doubt. Enmity with Trump changes the regulatory environment. Tesla bulls will hope they kiss and make up.
“EV subsidies were always on the chopping block by Trump, but I guess Musk thought his 'influence' at court would help. He found out he'd been labouring under a misapprehension.
“Anyway, look at it like this – the tax bill will cut Tesla’s EV subsidy, probably negatively impact profits by $1.2bn a year...plus there is $2bn hit coming from California legislation...which basically explains why Musk is such a big critic. The tax bill has much broader ramifications than EV credits and Tesla shares though – so the question is whether this intervention is going to derail the legislation. If it does, then it’s probably GOOD for Tesla. Also, deregulation on robotaxis was going to be bad for Tesla because FSD is not ready...easing the path was never a good plan.
“But then Trump has many other levers of revenge to pull – he's already mentioned pulling government contracts for things like SpaceX or Starlink. And then you have to chuck in elements like drones...which MS’s Adam Jonas says could turn TSLA into a defence stock... I guess TSLA won't be getting any Pentagon contracts soon ...but either way the bulls will keep grasping and throwing new reasons to buy.
“Does it blow a hole in the bull case? I never bought into the Tesla bull case in the first case - to me it just reaffirms what I already knew - Tesla was only profitable due to EV credits, it will keep disappointing on its rollout of tech and new products, there is a huge amount of political risk now for the stock, and it will continue to lose EV market share, meaning its multiple and valuation will have to come down over time.
“We could however see them back down from this. Both probably realise that this is doing each of them a lot of harm – Musk could lose billions of dollars in government contracts and tax credits, while Trump could see his “big, beautiful bill” fail to pass. The question is whether Musk is prepared to wreck SpaceX etc on the altar of Tesla.”
