After a significant surge in stock prices following Donald Trump’s election, Tesla (NASDAQ: TSLA) shares are experiencing a decline today. This dip comes as the S&P 500 faces its first drop since the election.
No substantial news emerged regarding Tesla itself; however, Hertz Global indicated ongoing weakness in demand for electric vehicles (EVs). This has caused investors to reassess Tesla’s valuation after the stock rose nearly 40% over the four days post-election.
As of 2:56 p.m. ET, the stock recorded a 5% decrease.
Image source: Tesla.
Hertz’s Weak Demand Signals Trouble for Tesla
The primary factor contributing to today’s sell-off stemmed from Hertz’s statement about low demand for EVs, as the company plans to offload 30,000 electric cars by year-end. Furthermore, J.D. Power anticipates a market influx of leased EVs, predicting that 65,600 will become available by the end of this year and 215,000 by 2026.
While these insights are troubling, the broader sentiment and valuation concerns also played a significant role. Tesla’s recent rally has not produced clear benefits for the company, leading investors to suggest that the excitement from the election is fading.
Assessing Tesla’s Future Amid Political Changes
Tesla’s stock has risen sharply since the election, particularly due to CEO Elon Musk’s newfound alignment with Trump. However, it remains uncertain whether this political favor will positively influence Tesla’s business.
Trump’s campaign included plans to eliminate EV tax credits and cut clean energy programs. Musk has often highlighted affordability as a significant hurdle for Tesla and the broader EV market. Losing the tax credit, which can be as high as $7,500 for some Tesla vehicles, could seriously hamper demand.
Investors hold out hope that the Trump administration will ease regulations surrounding autonomous vehicles, potentially aiding Tesla’s rollout of its new robotaxi service. Nonetheless, safety and public perception will be critical to its success. If these vehicles lead to accidents or if Tesla is seen as receiving preferential treatment from the government, it could harm the company’s reputation.
Despite Musk’s political connections, Tesla faces considerable uncertainty, coupled with a high stock valuation. If the anticipated benefits from this political environment fail to materialize, Tesla’s stock may see significant declines.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
