Tesla booms but future unclear

Elon Musk’s Tesla has smashed through the $1 trillion ceiling following Donald Trump’s election victory, but economists question how long the high will last.

Tesla’s value soared beyond $US1 trillion ($1.52t) on the back of Donald Trump’s election victory last week.

The EV giant’s market capitalisation broke through the trillion dollar barrier for the first time in two years, recording a 29 per cent increase that added $US230 billion ($349.5b) to its value.

Tesla’s $US 1 trillion valuation puts it far ahead of the combined values of traditional automotive brands such as Ford ($US43.6b, $66.2b), General Motors ($US61.12b, $92.9b), VW (€46.2b, $75.2b) and Toyota (¥42.05t, $418b).

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The trading performance was driven by Tesla chief executve Elon Musk’s close ties with President-elect Trump, having contributed more than $100 million to his campaign.

Investors are also aware that Musk’s job offer to lead the cutting of “unnecessary government costs” in Trump’s administration could influence any policies that directly benefit Tesla.

On Stake, Tesla quickly became the most traded stock, with activity up 500 percent compared to the day prior.

Tesla surged by 14.75 percent, hitting a two year high after Trump’s presidential win. Picture: RYAN COLLERD / AFP

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Stake market analyst Samy Sriram suggests the spike was driven more by market momentum than anything else.

“Trump trades took centre stage after Tuesday’s election results,

“While tech stocks were more mixed, it’s likely that most of the day’s price action was driven by momentum trades rather than fundamentals,” he said.

Sriram believes that Trump’s proposed policies could be favourable for Tesla in the short term, with his views on limiting imports benefiting Tesla over Chinese EV automakers vying for the US.

Tesla is a $1 trillion company once again after share prices surged.

However, there are potential long-term risks for Tesla.

As Sriram explains, the company relies heavily on China for both manufacturing and sales which will be problematic if Trump increases tariffs.

“China is the firm’s biggest market outside the US,” he said.

Tesla’s Shanghai Gigafactory produces more than one million cars each year.

The factory is a vital hub with Chinese sales compromising 39 percent of the company’s global deliveries in Q3.

If tensions rise with China, this could disrupt Tesla’s supply chain and lead to increased cost for US operations.

The Trump factor: Election victory has pushed Tesla’s value beyond $1 trillion. Picture: AFP

Trump has also been vocal about cutting EV subsidies domestically, which could negatively impact Tesla’s sales in the US.

While the short-term looks positive, Sriram said the long-term outlook is unclear.

“Tesla was the most traded stock on Stake over the last 24 hours —up by 500% from the day prior — but there’s an equal number buys and sells, suggesting that the jury is still out on the company’s prospects,” he said.

If Musk plays a major role in the Trump administration, then Sriram said it’s possible that his other companies could “reap the benefits” of lighter regulation in other domains.

“SpaceX, for instance, could gain an edge over its aerospace competitors like Boeing with a larger number of government contracts,” he said.

Originally published as Tesla booms but future unclear