Musk "bets" on Trump entering the "harvest season," what impact will it have on Tesla and other companies under his umbrella?

According to the Zhitong Finance APP, billionaire Elon Musk has become one of Donald Trump's most important supporters during the 2024 campaign. As the CEO of Tesla bets successfully, Tesla and other companies under his umbrella may greatly benefit from his relationship with the newly elected President of the United States, Donald Trump, but potential risks are also worth noting.

After Trump defeated Vice President Kamala Harris, Tesla's (TSLA.US) stock price closed up nearly 15% on Wednesday, with the company's market value soaring by about $120 billion. Previously, Musk had donated millions of dollars to Trump's campaign, and Trump had stated that he would establish a government efficiency committee led by Musk to cut federal spending.

Musk owns the Starlink satellite broadband system, is a major contractor for the U.S. Department of Defense, and is also the CEO of Tesla. In this context, his influence will be significant.

However, Musk is a beneficiary of some policies that Trump does not favor, including the solar and electric vehicle credits included in the Inflation Reduction Act passed by Biden in 2022. Given Tesla's sales, Trump's desire to reduce electric vehicle authorizations could harm Musk's competitors more severely.

An organization representing the electric vehicle industry stated on Wednesday that it is prepared to work with Trump, despite his vow to reverse several Biden-supported electric vehicle policies.

"Hedging His Bets"

Dennis Dick, a trader at Triple D Trading, stated, "Musk has essentially hedged his bets by aligning himself with Trump, and he is likely to receive favorable treatment from the Trump administration."

Dick mentioned that for Tesla, regulatory approval for full self-driving will be a significant hurdle, but with Trump's support, Musk may obtain regulatory approval more quickly.

After Trump's victory announcement, shares of electric vehicle companies Lucid Group (LCID.US) and Rivian Automotive (RIVN.US) fell 5.3% and 8.3%, respectively, on Wednesday. Additionally, analysts noted that Trump's promise to impose high tariffs on Chinese imports, especially electric vehicles, would shield Tesla from such competition. Shares of Chinese competitor BYD fell 2.3% overnight.

It remains unclear how Musk will address his conflicts of interest in the automotive, space, medical, construction, and artificial intelligence industries, and it is uncertain whether he will leverage these interests under the Trump administration's non-interventionist regulatory stance.

Musk may attempt to use his influence to reduce regulatory oversight of his businesses. He has been outspoken in criticizing the federal government's scrutiny of his SpaceX rocket business and hopes to expedite the approval of his autonomous driving technology.

Mamta Valechha, a consumer discretionary analyst at Quilter Cheviot, stated that if Musk takes on a role in deregulation and spending cuts, he will "influence U.S. policy on artificial intelligence, space exploration, and electric vehicles, and Musk's relationship with Tesla and other companies under his umbrella gives him direct interest in these areas." As Tesla is a major supplier of solar systems and batteries, Musk is also a strong supporter of carbon-free energy. Trump promised to stifle the offshore wind industry and rescind all unused funds under Biden's landmark climate law, the Inflation Reduction Act.

However, Republican-led states have benefited greatly from the act; meanwhile, Musk is building his second electric vehicle factory in the U.S. in Texas.

Risks Remain

At the same time, despite the seemingly favorable situation, there are still opposing risks. The core of Trump's political agenda is economic nationalism, and he has promised to raise tariffs on imported goods by 10% across the board, with tariffs on Chinese goods increasing to 60%. Escalating the trade war undermines Tesla's lasting advantage: having unique operational freedom in China, where Tesla holds 40% of its manufacturing capacity, and additionally, over one-fifth of its revenue in 2023 comes from the Chinese market.

But the greater risk may be that the two governments Musk relies on are in direct and escalating conflict. Those who previously depended on Trump have also faced disappointment, as evidenced by the list of loyalists dismissed by Trump's previous administration. Ultimately, Musk becomes increasingly vulnerable to the whims of either side, which, if prolonged, will cause him significant distress