Tesla Inc (NASDAQ:TSLA) boss Elon Musk’s decision to back Donald Trump for president could “backfire” with various negative consequences, according to a Wall Street analyst.
In the run up to the US presidential election, Musk has been a conspicuous supporter of the former president at rallies, as well as hosting town hall meetings and donating $100 million to create a political action committee to support the Republican party candidate.
Trump becoming president for a second term would be “an overall negative” for the electric vehicle (EV) industry as a whole, said analyst Dan Ives at broker Wedbush, as Trump is likely to pull current EV rebates and other tax incentives.
However, Tesla is unique in the automotive industry in terms of its brand and “unmatched” scale of EV output, so while the handbrake for the wider industry might offer some potential positives, said Ives, getting “a clear competitive advantage in a non-EV subsidy environment”, coupled by likely higher tariffs that would continue to block cheaper Chinese EV competitors from flooding the market.
But a Trump return to the White House with a harsher stance on China around tariffs and trade policy would not just bring silver linings.
“For Tesla the worry is that Beijing retaliatory policies would then set off a trade war and create geopolitical headwinds for Tesla within this key China market,” the analyst noted.
Evidence from the first Trump administration showed China headwinds are not an overall positive for Tesla, given an estimated 40%-plus deliveries come from the US company’s Shanghai gigafactory.
“Trump getting in the White House would open up a wild card on the China front that would be seen by the Street initially as a negative,” said Ives.
What’s more, Musk doubling down on his support for Trump could also have a negative impact on some aspect of consumer demand in the US, which Ives said has seen “a limited negative impact on demand” in recent weeks and “could impact some customers to go away from Tesla when buying decisions ultimately come around over the next year”.
Positives for the company from a Trump win could also include helping accelerate some of Tesla’s full self-driving (FSD) and other autonomous initiatives, benefiting some competitors like Waymo.
“The autonomous fast tracking will be front and center for investors in this scenario,” Ives postulated, as some of the 2026/2027 goals for Tesla could be accelerated to stay on track with the China timeline for autonomous currently underway.
Musk said recently he expects Tesla to release an “unsupervised” version of FSD in 2025 on certain Model 3 and Model Y vehicles and would start producing robotaxis by 2026 or 2027.
If Kamala Harris wins, Ives would expect the EV tax credits to ultimately be increased in 2025 as the goal to get more US consumers towards EVs would be a “laser focus”.
With Detroit auto stalwarts GM, Ford and Stellantis betting heavily on EVs, Harris winning the White House would be a positive for the overall EV industry and likely to be a “neutral/slight negative impact” for Tesla.