Tesla, the electric car and renewable energy giant led by Elon Musk, saw a 29% Tesla stock increase in the first week of November 2024. The rise followed Donald Trump’s unexpected win in the US presidential election.
Hopes soared with the new presidency. This created expectations for a shift in regulatory standards. Tesla is venturing deeper into a competitive market. The market is now ridden with new challenges.
Amazing market performance of Tesla
Tesla’s shares rose by 8.2% last Friday (8 Nov.). This pushed the company’s market capitalization past $1 trillion. It was the first time in over two years that this happened.
This was a great reversal for a company that had been the worst-performing member of the so-called “Magnificent Seven” U.S. tech stocks. Before Trump’s win, Tesla was struggling with future growth concerns and regulatory issues.
CEO Elon Musk, who became one of the key supporters of Trump’s campaign, allegedly invested $130 million (€121 million) in the cause. This is because Trump’s win boosted expectations of less regulation which has benefitted market sentiment in the electric carmaker.
Tesla stocks rose 29% in the previous week. This brought their yearly increase to 30%. Last week, they closed with a market capitalisation of $1.03tn ($0.96tn).
Tesla Self-Driving (FSD) technology
This comes at a time when regulatory backing is crucial for Tesla. The company is struggling to secure approval for the Full Self-Driving (FSD) feature. Tesla has already laid out an aggressive plan. It aims to launch robo-taxi services in both Texas and California. The ultimate target is expanding across the country in 2025.
Should Trump’s administration remove the regulatory obstacles, Tesla could gain a competitive advantage. This would help in the rapidly growing auto-pilot market. Musk has long been an advocate of autonomous technology. A boost from Trump’s regulatory approval could accelerate Tesla’s Robotaxi services. This includes the Cybercab, which could enter mass production by 2026.
However, the company’s future outlook is uncertain and controversies surrounding the risky self-driving vehicles persist. The U.S. The National Highway Traffic Safety Administration (NHTSA) began investigating Tesla’s FSD software in April of this year.
Four crashes were reported, one of which led to a fatality. This scrutiny could lead to a recall. The recall could involve up to 2.4 million cars, including the 2016-2024 Model S, Model X, Model 3, and Model Y. It may also include the 2023-2024 Cybertruck.
Controversial self-driving cars
The autonomous technology used by Tesla has been controversial. The company released Autopilot in 2015 and FSD software in 2020.
Despite the pledge that the FSD system would reduce human error, Tesla has faced challenges. By 2024, the company recorded over 1,000 accidents related to its FSD. Additionally, 33 deaths have been linked to the system.
Despite the bright future of FSD technology, critics have raised concerns. They point out that the technology needs further enhancement. It struggles to perform well in difficult conditions like glazing, fog, or airborne dust. This leads to its failure to detect obstacles. As a result, it cannot prevent accidents.
The current NHTSA investigation intends to establish whether FSD by Tesla can accurately detect danger and respond accordingly. In case the results are negative, the firm is likely to be dealing with significant recalls which will weigh on its ambitious self-driving projects. Even Dan O’Dowd has campaigned for making FSD illegal, referring to the dangers involved.
However, Tesla continues to push forward its goal of creating autonomous cars. The company believes self-driving cars will reduce road mortalities. They will also increase orderliness. Additionally, they will ensure that everyone with a physical disability, or those who cannot drive, has access to transport.
A Competitive Global Landscape
Tesla’s problems do not end here. Besides the governmental barriers in the United States, overseas, Tesla has a strong competitor in the Chinese car manufacturer BYD and the Japanese Toyota. The two competitors have been quite assertive with their electric vehicle plans, thereby raising the stakes in the automotive market.
Nonetheless, Trump’s proposal to impose tariffs on imported cars could benefit Tesla. The company may gain a competitive advantage in key markets.
However, there is a problem. When Biden was president, Tesla benefited greatly, including $739 million (€685 million) in regulatory credits in the third quarter. Trump, on the other hand, has threatened to remove all subsidies to electric vehicles, which will financially pressure the company.
Musk is going to have to quickly make headway removing regulatory barriers that impede self-driving automobiles and ramp up production to make up for misplaced credits.
Increase in Q3 Boosts Confidence
Tesla’s amazing run-up in the week following Trump’s win in the presidential elections was also due to the fact that the company recorded a good third-quarter earnings result, thus signifying a tremendous improvement. Core automotive revenue, therefore, rose by 2% yoy, reversing two straight quarters of marginal declines. The total revenues were up 8% year on year, which has been the best increase in one year.
Sales of automobiles rose to 462,890 in the third quarter from 434,810 when compared to the similar period a year earlier, marking a growth of 6.4%. This was the largest third-quarter the company has ever reported and the third-highest quarterly production total in Tesla’s existence. Musk is bullish and is expecting car deliveries to jump between 20% and 30% in 2025, which will once again indicate that consumers are ready to buy electric vehicles.
Tesla’s Energy division also stood out, growing 52% y/y and delivering its highest gross margin in all the divisions at 30.5%. The Cybertruck – an electric pickup truck, futuristic in design, reached its first profit, and the hugely important, high volume electric car for the masses is planned for 2025 with 50% growth in volumes expected.
The Valuation Dilemma
Despite this positive news, analysts believe Tesla’s stock is overvalued. In one week alone, the company’s P/E ratio went up from 68 to 88, mirroring that of the competitor, Nvidia at 69. “That is not an uptrend; that is an explosion!” market strategist Michael McCarthy noted on Trading Guild AU. Regardless of Tesla’s future trajectory over the medium to longer term, this kind of price volatility simply cannot continue indefinitely.
The rally has reignited discussion on whether or not Tesla deserves its current market cap. Many suggest that, in the absence of quick gains on the regulatory and technical fronts, the business could have problems holding onto its lofty valuation. Nevertheless, electric car visionary Tesla’s future continues to hold the promise of all sorts of interesting possibilities. If Musk is going to handle political risks, technological constraints, and competition from other automakers, then Tesla might transform the automobile sector again.
As the market waits to see whether the Trump administration’s policies will indeed favour Tesla, one thing is clear: the electric carmaker is in for a year and possibly a decade or more of a roller-coaster ride depending on how well it adapts to new circumstances.
Future Forecast for Tesla Stock
Tesla’s stock could continue to experience volatility in the short term due to regulatory uncertainty, particularly regarding the Full Self-Driving (FSD) technology and the potential for recalls.
The success of the company’s self-driving technology, along with regulatory backing under the Trump administration, will play a critical role in shaping future performance. If FSD moves forward and Tesla secures approval for its robotaxi plans, it could strengthen its competitive position and drive long-term growth.
However, competition from companies like BYD and Toyota, along with the impact of tariff policies and potential loss of subsidies, could pressure Tesla’s margins.
Analysts remain cautious about the stock’s valuation, suggesting that despite strong sales and production growth, Tesla’s high P/E ratio could limit upside potential in the near term.
If Tesla can navigate regulatory challenges, improve its technology, and grow its energy division, the stock could see continued growth in the medium to long term. However, high volatility and external factors such as political risks and market competition remain a concern for investors.
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