The Electric: Does Tesla Really Stand to Prosper From the Trump Presidency?
Since Donald Trump won reelection as president, many investors have assumed that the chief beneficiaries would include businesses run by Elon Musk, his biggest financial backer and recently his frequent companion. Investors have pushed up the share price of Musk’s one listed business—Tesla—36% since the Nov. 5 election.
But the Tesla ventures that Wall Street investors most expect to prosper from White House favor—artificial intelligence plays such as self-driving Robotaxis—are long-shot bets that rely more on technological breakthroughs than on friends in government. The Trump administration can loosen federal oversight of autonomous vehicles, but experts say Tesla’s far bigger obstacle is getting its self-driving technology ready for the road.
“Any supposed regulatory hurdles are remote and trivial compared with Tesla's technical hurdles,” said Bryant Walker Smith, a law professor at the University of South Carolina who studies autonomous vehicles. “Or, to phrase it differently, any imminent regulatory hurdles are because Tesla does not have and cannot show a reasonably safe automated driving system.”
Musk himself appears to have a range of political reasons to seek proximity to Trump, beyond advantageous government treatment of Tesla, SpaceX and other businesses he controls. As for investors, their current fervor for Tesla shares may simply reflect a desire to invest in Musk’s relationship with Trump in the only way they can, and not a firm conviction of how or even whether Trump will help Tesla.
Either way, Tesla shares rose almost 8% on Monday after Bloomberg reported that Trump seemed likely to propose straightforward federal regulations for self-driving vehicles that would supersede current state-by-state rules. At the moment, the only federal rules for self-driving vehicles are safety regulations and a 2,500-car limit on the number of vehicles without steering wheels or pedals a company can deploy each year.
If the Department of Transportation issued a single set of rules for driverless cars, that could make it easier for Tesla to catch up with Waymo, owned by Alphabet, and General Motors’ Cruise, whose driverless cars already ply roads in cities including San Francisco, Los Angeles, Phoenix, Dallas and Austin, Texas. Waymo also takes paying passengers in Los Angeles, Phoenix and San Francisco. With federal rules, Tesla would no longer have to seek permission of regulators in those same states, as Waymo and GM did.
Last month, Musk said he would deploy self-driving Teslas in two stages: Next year, he said he would release Tesla Model 3s and Ys powered by Tesla’s autonomous Full Self Driving software; those would be capable of driving without human supervision—motorists could drive hands-free and not have to watch the road—but would still come equipped with pedals and steering wheels. In 2026, he said he plans to deploy driverless Tesla Robotaxis with no steering wheels or pedals.
One big Musk gamble is that Tesla can achieve nearly risk-free driving using just cameras and AI; almost all of Tesla’s rivals in the West and China use sensors such as radar and lidar in addition to cameras.
Analysts appear reluctant to say flatly that there is a chance that Musk’s bet on cameras and AI does not pan out and that he has to add other sensors onto Tesla vehicles. Musk himself has repeatedly urged investors who don’t believe Tesla will solve self-driving to take their money elsewhere, though last month he admitted that, in terms of timing for delivering on his promises, “I tend to be a little optimistic.”
A number of analysts are giving him latitude. In a Nov. 14 note to clients, Tom Narayan, an auto industry analyst with RBC Capital Markets, said he had just returned from a visit to Tesla’s Austin gigafactory. FSD still “has a ways to go,” he wrote. Even so, he added, the tour “gave us increasing confidence in Tesla’s ability to achieve its autonomy goals.” Narayan attributes 76% of Tesla’s value to FSD and Robotaxis. “In our view, Tesla FSD is the most robust autonomy software on American roads today,” he wrote.
Other analysts aren’t so sure. In a note to clients on Monday, Morgan Stanley analyst Adam Jonas said he does not expect mass deployment of Tesla’s autonomous vehicles until the mid-2030s. Musk winning federal regulatory oversight of self-driving technology will “not magically catapult Tesla FSD efficacy to the 99.999% (reliability) threshold where Teslas can drive themselves unsupervised,” tweeted Gary Black, managing director of the Future Fund and a Tesla investor.
Even if Musk does get there on his timeline over the next two years, it won’t be like the 2010s, when Tesla—once it got through production hell—profited handsomely because it was virtually the only electric vehicle on the road. In autonomous cars, he will face stiff competition here in the U.S. and also in China.
“Right now there are real automated vehicles carrying real people on real roads. None of them are Teslas,” said Smith, the University of South Carolina professor.