Tesla Motors Inc’s (NASDAQ:TSLA) and Trump: What Is Not Being Said?

November 21, 2016 - By Ruchi Gupta   ·   0 Comments

It is prevalent that Tesla Motors Inc (NASDAQ:TSLA), CEO Elon Musk, and the U.S President-elect have not been reading from the same script.  The cloud has triggered massive speculations of whether or not Musk’s empire will survive under Trumps administration.  Among Musk projects is the elimination of zero-emission vehicle (ZEV) credits. While Trump has not fully embraced the idea of climate change, there are fears that he could cancel out the ZEV credit program citing that the project is a Chinese creation that is meant to make U.S. manufacturing non-competitive.  So does it mean that the relationship between Tesla Motors and Trump is on the verge of collapsing?

Apparently, Musk has been receiving so much support from President Obama’s administration including the latest goal of making the trip to Mars cheaper. While the POTUS may not have had a direct hand in Musk’s business empire, he openly supported the ‘politically-correct’ technologies that Musk and his companies pushed forward.

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Tesla and Trump: Will Musk’s empire thrive?

Writings are on the wall that things are likely to go south if Tesla and Trump fail to figure out the way out of their cold war. Musk must trend very carefully given that the success of all his three companies have been relying on federal and state funding.  If the funding is stopped, it will affect not only SpaceX and its mission to Mars but also the entire empire. Besides, Trump, an ardent climate denier has categorically expressed his intentions of putting pressure on California to abolish its ZEV mandate.

But surprisingly, Musk’s opinion over the elimination of ZEV credits is that it would advance Tesla’s competitive position in the market. He says they are a disadvantageous incentive thus Trump’s proposal wouldn’t affect Tesla.

He quoted, “If people are concerned about Tesla incentives, they should be concerned with, ‘Well, how does Tesla overcome the disadvantage of EV incentives.’’

About the ZEV credit program

The ZEV mandate entails the sale a certain number of zero-emissions vehicles by automakers or risk a fine.  Tesla has always had an excess of ZEV credit based on the fact that it only sells electric cars in states supporting the mandate. The market set up has created an oversupply of ZEV credits.

However, Efraim Levy, a CFRA Research analyst says that ZEV credits are not a substantial piece of pie for Tesla. They do not determine its future profitability. The question now remains, will Tesla and Trump open a new chapter and to whose benefit?

Tesla was trading at $185.02 after witnessing a decline of $3.64 or 1.93%

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By Ruchi Gupta

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