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Tesla stock extends rally as Musk-Trump alliance fuels gains

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The Tesla logo is seen on a car in Los Angeles, California, U.S.
FILE PHOTO: Tesla shares rise 7% premarket, driven by investor optimism over Musk’s support for Trump. The Tesla logo is seen on a car in Los Angeles, California, U.S., July 9, 2020. REUTERS/Lucy Nicholson/File Photo

By Zaheer Kachwala

(Reuters) -Tesla shares extended last week’s sharp rally with a jump of over 8% on Monday, fueled by bets of the automaker benefiting from CEO Elon Musk’s close ties with U.S. President-elect Donald Trump.

At $348.30, Tesla is expected to add nearly $87 billion to its value if gains hold. The stock has jumped nearly 28% since Trump’s election victory was declared on Wednesday, surpassing $1 trillion in market value for the first time in two years.

Tesla’s year-to-date gains were just over 1% before Trump secured his second term at the White House.

Musk has been supporting Trump for months in the hopes that his close ties to the now President-elect would position his companies to benefit under the new administration, analysts have said.

The billionaire contributed at least $119 million to a pro-Trump spending group, federal records show.

“As an ‘efficiency Czar’, Musk is likely to see this as an opportunity to sweep away red tape and streamline regulation”, potentially helping his companies that are “at the forefront of technological innovation”, said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

From Tesla’s electric vehicles to SpaceX rockets and Neuralink brain chips, Musk’s business ventures depend heavily on government regulation, subsidies or policy.

Tesla’s self-driving technology has been under scrutiny from safety regulators as Musk attempts to shift the company’s focus towards autonomous driving and robotaxis.

In September, Trump said he would establish a government efficiency commission headed by Musk to cut federal spending.

Musk’s potential influence in the government could be significant for his other ventures, such as the Starlink broadband system, owing to his role as a major contractor with the U.S. Department of Defense.

Streeter said claims of “preferential treatment” have the potential to end up in court, but given the litigation route is long and difficult, Musk’s businesses have plenty of time to benefit.

Trump has also vowed to pare back certain EV incentives of the Biden administration, but startups are likely to take a bigger hit than Tesla because of the automaker’s heft in the market, analysts have said.

(Reporting by Zaheer Kachwala in Bengaluru; Editing by Devika Syamnath)

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