TSLA Stock Dropped Significantly Because of Trump’s Election
Tesla Motors Inc (NASDAQ:TSLA) is in a bit of trouble. Tesla stock is down significantly, despite having just announced its best quarterly performance ever. What kind of virus did Tesla catch? It’s the Trump virus, of course, and it threatens to spread to many ‘clean’ energy industry companies. Specifically in Tesla’s case, even though Trump has not had a chance to outline his environmental policies, he has promised to revive the coal industry.
Indeed, that’s what made him so popular in the traditional coal mining states like Pennsylvania. And coal did go up. Peabody Energy Corporation (OTCMKTS:BTUUQ) stock, the largest private sector coal producer, doubled in value. The overall sentiment is that under Trump, EPA regulations will be pulled back.
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Trump has often expressed an intent to scrap the U.S.’s commitment to the Paris Climate Change Deal. He’s also hinted that he would repeal EPA standards for fuel-efficient car manufacturing. For Tesla, this means that the government would no longer offer tax credits for buyers of electric cars. Indeed, California climate credits helped Tesla make its first profit.
Investors initially took this as good news, but it also suggests that without credits, Tesla is a money loser not a moneymaker. Now, buyers can receive up to a $7,500 tax credit for buying an electric car in the U.S—so long as the manufacturer that produced it has not reached a federally mandated limit of 200,000 vehicles. Without the credit, even Tesla’s cheapest offering (for which deliveries are not expected until late 2017, at the earliest) increases from $27,500 to $35,000.
A recent article, meanwhile, claimed that Tesla earned more money in the last quarter than the entire US oil industry in 2016. Frankly, even I made more money than oil, an industry operating at a loss. (Source: “Tesla made more money last quarter than the entire US oil industry made last year,” Elektrek, Nov.10, 2016.)
The statement is meant to shock, because TSLA stock enjoyed two consecutive quarters of profits. Their first ever. It also hints at just how much the company relies on subsidies and the risks a Trump presidency poses.
No doubt, TSLA stock remains under pressure. It’s reversing some of its previous brand-shaping business decisions. New buyers will no longer benefit from free battery recharging, as the company tries to build revenue to capitalize production of the “Model 3″—delays notwithstanding. On election day, no less, Tesla announced that its superchargers would be free only for old customers. New ones would have to pay. This would automatically increase the price of a Tesla.
