Since Donald Trump's election as President on November 6, Tesla (TSLA, Financial) shares have surged by about 28%. This increase is driven by expectations that Elon Musk's support for Trump would yield benefits under the new administration. It seems Musk's alliance with Trump is starting to pay off, as Trump's transition team plans to prioritize fully self-driving (FSD) vehicles within the Transportation Department.
This development negatively affects rideshare companies Uber (UBER, Financial) and Lyft (LYFT, Financial), both experiencing significant losses. Although Tesla's Robotaxi unveiling on October 10 was not well-received, a supportive regulatory environment could accelerate Tesla's timeline. Musk aims for Cybercab to reach volume production by 2026, a target that seems more achievable with Trump's support.
While it's unclear what specific actions the Transportation Department will take to boost autonomous vehicle (AV) deployment, one potential change is increasing the number of AVs manufacturers can deploy. Currently, the NHTSA limits manufacturers to 2,500 AVs annually, restricting data collection and analysis.
Despite a favorable regulatory outlook, Tesla still faces significant technological and production challenges. After years of substantial R&D investments, Tesla's FSD system continues to encounter major issues. In October, the NHTSA launched another investigation into the FSD feature following reports of four crashes, including one fatal incident. The report highlighted the system's failure to respond to poor visibility conditions.
Tesla's FSD system has also experienced recalls, such as one affecting over 2 million vehicles last December. These challenges persist even as Tesla's capital expenditures have surged to nearly $11 billion on a trailing twelve-month basis, with a significant portion allocated to the "Dojo" supercomputer, which trains AI models to enhance FSD capabilities.
Tesla has faced challenges with rising competition and high interest rates impacting its growth, with automotive revenue increasing by just 2% in Q3. However, the market is beginning to factor in Tesla's next growth phase. Tesla is expected to start production of the Model 2, a more affordable mass-market EV, in the first half of 2025. While skepticism remains around Tesla's robotaxi plans and AVs, the Model 2 launch could be followed by the Cybercab launch in 2026. If successful, Tesla's growth rates could see a significant boost over the next two years.
