A Tesla, Inc. TSLA bear on Wednesday said a second term for Republican nominee Donald Trump is a negative for CEO Elon Musk and his electric-vehicle giant.
Terrible For Tesla: Musk has been subject to several Department of Justice investigations, said Stanphyl Capital Managing Member Mark Spiegel. “There are…. several at least fraudulent things he's done in plain sight,” he said, adding that the billionaire is having trouble with the DOJ.
The portfolio manager also said a Trump second term will likely be a negative for Tesla. “It is unquestionable that a Trump-Vance administration is terrible for Tesla from a business standpoint,” he said.
Spiegel noted that Trump has said time and again that he would get rid of all the EV mandates and the so-called Inflation Reduction Act. This meant that Tesla wouldn’t have the margin anymore, he said. If Tesla might get $3,000 in a car and if the $7,500 EV tax credit is eliminated it may have to raise prices, which in turn will weigh down on demand, he added.
About 70% of the buyer base of EVs are Democrats, and with now Musk outrightly endorsing Trump and contributing to the Republican campaign, only very few Democrats would be willing to buy a Tesla at this point, Spiegel said. Musk has “completely alienated most of his buying base,” he said, adding that the situation was the same in Europe. The Democratic-equivalent in Europe, the liberal progressives, won’t buy Tesla either, he said.
Spiegel also sees Trump doing away with the EV mandates, which means auto manufacturers will not be forced to sell a certain amount of EVs to avoid penalties. “If OEMS don't have to jam electric cars down people's throats OK, so Tesla can have more market share but it's going to be a shrinking market especially if they have alienated 70% of their user base and then their cars plus $7500 more so, it's that many fewer buyers.”
The regulatory credits, which have a 100% gross margin, may not flow into Tesla if the EV mandates are eliminated, he said.
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Why It’s Important: Tesla has been through a prolonged fundamental lean patch during when the macro uncertainties and slowing EV adoption hurt demand. Price cuts, the strategy adopted by the company to sidestep the headwinds served to erode its margins.
Incidentally, Musk recently lauded Sen. J.D. Vance (R-Ohio), whom Trump picked as his running mate despite the senator’s anti-EV stance. Pursuant to that the billionaire said taking away subsidies is going to only help Tesla. The Tesla CEO echoed the sentiment relayed by Wedbush Daniel Ives in a note last week. “A Trump presidency would be an overall negative for the EV industry as likely the EV rebates/tax incentives get pulled, however for Tesla we see this as a potential positive,” he said.
“Tesla has the scale and scope that is unmatched in the EV industry and this dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment,” the bullish analyst said.
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