Tesla profits could shrink by 40% under Trump

Regulatory changes could cost Tesla the most, one analyst believes, with profits likely to fall by $3.2 billion

Elon Musk spent more than $270 million to help get Donald Trump into office, and he likely believes a Trump-led administration will help his companies, including Tesla and SpaceX. Musk’s personal fortune has soared by more than $200 billion since the election, largely due to Tesla’s surge in stock prices. However, one analyst said Tesla’s profits could fall as much as 40% this year with Trump in the White House.

JPMorgan’s Ryan Brinkman believes that if the incoming president eliminates the $7,500 federal electric vehicle tax credit, which he is widely expected to do, it would “have significant consequences for Tesla.” profit risk”. The electric carmaker had a strong fourth quarter, but overall global sales in 2024 were not as strong as expected, with deliveries of 1,789,226 vehicles, slightly lower than in 2023. This marked the first time in more than a decade that Tesla did not increase annual sales.

Read: Is time running out for the $7,500 electric vehicle tax credit? Experts advise buyers to hurry up

“We believe the delivery slowdown has the potential to refocus investors on all-period delivery, revenue, gross margin, EBIT, EPS and free cash flow forecasts, even before the potential removal of subsidies,” Brinkman said. “Deterioration.” He added that Tesla may suffer the most from changes in the regulatory background, and its profits may fall by about $3.2 billion, or 40%.

The analyst added that BEV sales share is likely to decline under Trump in “virtually every region” and said Tesla “doesn’t appear to us to be in a position to dominate globally in the electrification transition.” Automotive, we think this is just the starting point for current valuations,” according to Business Insider. JPMorgan Chase also estimates that Tesla’s share of global pure electric vehicle sales will decline from about 15.5% to about 13.7% by 2024.

Oddly enough, Elon Musk publicly supports repealing the electric vehicle tax credit. He argued that eliminating the credit would hurt rival brands including General Motors, Ford and Hyundai, which rely heavily on subsidies to raise the price of electric vehicles. Because Tesla has a first-mover advantage in electric vehicles and is the current market leader, it can develop and sell electric vehicles at a lower cost than most competitors and theoretically increase its share. We’ll wait and see if he’s proven right, or if the pessimistic predictions from JPMorgan analysts come true.