Tesla shares rise as Elon Musk stands to benefit from Donald Trump's election victory

Tesla (TSLA+3.46%) The stock has soared since former President Donald Trump defeated Vice President Kamala Harris Become the next President of the United States.

The electric vehicle maker's CEO, Elon Musk, has become a close ally of Trump even in the last few months spend election night with him at Trump Mar-a-Lago Resort in Florida. Musk, who also runs several other companies, is poised to have some role or influence in the incoming Trump administration, which he will likely use to benefit his company.

Tesla shares rose as much as 15% in after-hours trading before retreating slightly to a 12.5% ​​rise in premarket trading on Wednesday morning. By the time the market closed Tuesday afternoon, shares were already up more than 3%. DOGE, Musk's most popular cryptocurrency, rose more than 18%.

Musk has agreed to lead what he and Trump call a Ministry of Government Efficiency (DOGE), a commission that would do that Behavior a “full financial and performance audit of the entire federal government” and recommends reforms. Musk has said he would cut “at least.” 2 trillion dollars from federal spending, which is likely a difficult task given how much the federal government spends $6.75 trillion in the 2024 financial year.

As part of this job, Musk said he would do it advocate for a national approach to regulating self-driving vehicles – a key market for Tesla – and reducing over-regulation, which he has done repeatedly criticized as if he was holding back his companies. SpaceX, Neuralink, X and Tesla are collectively the subject of at least 20 current investigations or reviews.

But whatever is his The exact role in the administration remains unclear. Cantor Fitzgerald CEO Howard Lutnick, who leads Trump's transition team, said Musk will work “alongside the government” and “write software” to help the government cut spending. That would likely allow Musk to continue running his companies without divesting, which he would have to do if he were to take on an official role.

While Trump's victory is good for Tesla, it is also expected less friendly to other automakers with EV plans. He is expected to freeze President Joe Biden's regulations Inflation Reduction Act of 2022, which provided $7,500 in tax credits for electric vehicles manufactured in the United States. Musk has supported eliminating the tax credit because he believes it would help Tesla sales while crushing competition.

“We believe a Trump presidency would be negative for the EV industry overall as EV rebates/tax incentives are likely to be eliminated. However, we see this as extremely positive for Tesla,” Wedbush Securities analyst Dan Ives wrote in a note Wednesday morning.

Ives added that Trump's victory could boost Tesla stock by $40 to $50 per share and reach a market cap of over $1 trillion if his presidency allows Tesla to accelerate its autonomous vehicle plans.

Last month, Musk said that Tesla expects to start offering ride-hailing services next year in at least two states, California and Texas, where he also wants to get regulatory approval for “fully autonomous, unattended” Full Self-Driving (FSD). Tesla also plans to begin scaling production of its Cybercab robotaxis in 2026 and plans to ultimately produce between 2 and 4 million units per year; That's more units than Tesla currently sells electric vehicles.