Unraveling Elon Musk's EV and Autonomous Vehicle Strategies

Tesla's Scale an Advantage Over Competitors

Trump's second term is anticipated to be tough for the entire EV industry. Alongside scrapping EV tax credits, he has vowed to revoke vehicle emissions standards, compelling car manufacturers to increase the share of EVs in their total sales over the next decade. However, there is a potential for Tesla to gain from these anti-EV policies. Musk himself stated in a July call with investors that eliminating the federal tax credits could benefit Tesla in the long run as it would be disastrous for competitors.

Tesla stands out as one of the few U.S. carmakers with profitable electric vehicles, providing it with a buffer against industry-wide headwinds. The company can produce electric cars at a lower cost than domestic rivals, enabling it to undercut them on pricing in a market without subsidies. Nevertheless, Tesla's sales are likely to be impacted by the elimination of the EV tax credit. Gene Munster, co-founder of Deepwater Asset Management, has compared the end of the tax credit to a 15% price increase on Tesla cars, which could cut into sales.

Ending the tax credit could also dissuade competitors like General Motors and Ford from continuing to invest heavily in EVs, leaving the door open for Tesla to expand its already substantial market share.

Musk All-In on Autonomous Cars

Musk's support for ending EV subsidies may stem from his significant bet on autonomous driving and robotaxis. In July, when questioned about EV tax credits, he emphasized that "the value of Tesla overwhelmingly is autonomy. These other things are an annoyance relative to autonomy."

Bloomberg reported that the Trump team plans to make a federal framework for autonomous vehicles a priority for the incoming Transportation Department. A framework that accelerates the adoption of self-driving cars would benefit Tesla, which unveiled prototypes of two new autonomous vehicles last month.

Musk anticipates that Tesla's Cybercab and Robovan, which have no pedals or a steering wheel, will eventually form a robotaxi fleet that directly competes with ride-sharing services like Uber and Lyft. Since articulating this vision, Tesla's stock has surged as some investors have repositioned Tesla as an autonomous vehicle and AI company rather than a traditional car maker. Before Trump's re-election, the path to making Musk's robotaxi dream a reality seemed to face more regulatory hurdles, with companies like Alphabet's Waymo and GM's Cruise facing significant scrutiny from safety officials.

Musk's influence with Trump could potentially clear the way for Tesla. As Wedbush analysts wrote, "The golden path for Tesla around Cybercabs and autonomous is now within reach with an emboldened Trump/Musk strategic alliance playing out in real time."