How can Elon Musk’s political engagement impact the future of his company?
Tesla shares are among the most popular on the Polish market. They ranked at the top of the most chosen ones among Saxo platform users in the first half of 2024. A Saxo expert analyzes the potential consequences for Elon Musk’s brand and, consequently, for investors, of his growing political involvement, including his open support for Donald Trump.
As John J. Hardy, Chief Macroeconomic Strategist, Saxo, points out, Kamala Harris has about a 3% lead in national polls, but in seven key states that could decide the election, the differences are minor. This means her chances of winning are around 50-50, according to betting markets. It’s hard to imagine yesterday’s vice-presidential debate, taking place five weeks before the election, will significantly impact the power dynamic. As the expert emphasizes, voter turnout will be a key factor in victory. Harris, to win, needs to mobilize particularly young people who have never voted before. Meanwhile, Trump will have to convince voters who blame the Democrats – whether rightly or not – for the most pressing problems plaguing the country: inflation, the economic situation, and immigration.
“The 2024 US presidential elections stand out against the background of previous ones due to extraordinary circumstances, such as the assassination attempt on Donald Trump, the resignation of Joe Biden and the rapid takeover of the Democrats by Kamala Harris, to name just a few. The current dynamics of the race increase the level of uncertainty about its outcome. Although it is difficult to predict exactly how the election results will affect the markets, this situation can affect companies like Tesla, especially considering Elon Musk’s political engagement. Therefore, it will be crucial for investors to develop a strategy that adapts to changing conditions related to the elections, whether by diversifying the portfolio or looking for additional profit opportunities,” says Marcin Ciechoński, responsible for Saxo’s development in Poland.
Several years ago, Elon Musk, the founder and CEO of Tesla, declared himself a centrist and stated that he voted for Joe Biden in 2020. However, in the past two years, he has taken an anti-establishment stance and now openly supports Donald Trump. In July, Musk pledged to devote $45 million a month to a committee supporting Trump’s campaign. Such political involvement significantly raises the stakes for both Tesla and Musk’s other businesses.
Tesla is currently the smallest firm in the original “Magnificent Seven,” with a market capitalization well below $1 billion. The company’s shares are noticeably below their peak value at the end of 2021 when they were over $400, due to the slowing growth rate of the firm. Still, Tesla remains highly valued, nearly reaching nine times its revenues. For comparison, Toyota, also profitable, is valued just 0.7 times its revenues. To justify current valuations, Tesla not only needs to introduce new vehicles and increase market share but, above all, realize its vision of autonomous driving. In this context, how investors will perceive the delayed RoboTaxi event taking place on October 10 will be key.
Tesla shareholders may have wondered whether the CEO’s increasing political engagement poses a risk to the corporation. An example could be Musk’s costly acquisition of Twitter (currently X) and his anti-establishment approach to various controversial political topics, which led left-leaning users to abandon the platform. Similarly, Musk’s support for Trump has caused a stir among left-wing (and particularly Hollywood) activists, who hold Tesla shares. An NBC poll found that just 6% of Democrats have a positive opinion of Musk, compared with 79% negative. In contrast, 62% of Republicans had a positive view, with 14% negative.
Implications: Musk is playing a risky game, and his controversial personality is likely hurting rather than helping his brand’s appeal to potential owners, regardless of the election’s outcome. Carrying a Tesla could be perceived as a political statement, which Trump’s opponents would prefer to avoid, especially if he wins. Sensitivity to these issues may be just as high, if not higher, abroad – in countries like China, Europe, and other regions.
Joe Biden’s Inflation Reduction Bill authorized a $7,500 subsidy for each electric vehicle manufactured in the USA. These will be valid until 2032. Trump often criticizes the green agenda and questions climate change, promising to abolish subsidies for electric cars.
Implications: Elon Musk has a bold stance on this, but if Trump wins and gains the votes to abolish subsidies for electric vehicles, it could have a short-term negative impact on Tesla, and especially on other electric car manufacturers in the USA. A political deadlock scenario after the elections or a full Harris victory will benefit Tesla, as the subsidies will continue, at least for some time.
The risk related to tariffs is high and works both ways. On the one hand, Musk has stated that Chinese companies manufacturing electric vehicles are the most competitive globally, which poses a clear threat to Tesla’s market share. From the other side, if Trump wins and imposes tariffs on other countries, we can expect reciprocal moves from those partners, which will hit Tesla’s market share abroad.
Implications: It’s hard to foretell how the situation will evolve in this sphere. Generally, a Harris victory means status quo, while a Trump win might either have a neutral effect or cause some risk – it could benefit Tesla domestically but risk its market share abroad.
After the elections, Tesla will face numerous risks, but the greatest one may be its valuation, largely based on promises to deliver a fully autonomous driving experience. Can the company achieve this, and how quickly will regulators approve the market launch of millions of fully self-driving (FSD) vehicles moving on public roads?
Source: https://ceo.com.pl/odliczanie-do-wyborow-w-usa-jak-wyniki-moga-wplynac-na-przyszlosc-tesli-46399
