Tesla
stock has increased by more than 24% in the past month.
While still far from the highs of $480 per share reached in March, investors
seem to have regained optimism, and surprisingly so. Last week, news broke that
Tesla’s sales in China had declined for seven consecutive months. In addition,
new car sales in the U.K. fell 62% year-on-year in April. Why the sudden
turnaround in sentiment?
The main reason, as expected, is the renewed hope for
future improvements.
First, news broke in April that Elon Musk plans to reduce
his work at the Department of Government Efficiency (DOGE) to just one or two
days a week starting in May. The rest of his time, he said, will be focused on
his “business interests,” particularly Tesla. Investors have welcomed this
renewed focus on the company.
Second, tensions between the United States and China have
eased slightly. The two countries recently agreed to a temporary
90-day tariff truce while they work to reach a broader
trade agreement. Under the agreement, the U.S. will reduce tariffs on Chinese
imports from 145% to 30%, while China will lower tariffs on U.S. imports from
125% to 10%. Theoretically, Tesla could benefit from the resulting drop in
tariff-related inflation.
The third catalyst is Tesla’s plan to launch its
autonomous driving software in Austin, Texas, next
June. If the RoboTaxi model is successful, it could give Tesla a technological
monopoly, resulting in significant cost savings for the cab industry. The
RoboTaxi could drive strong domestic demand before expanding to other OECD countries
because cabs are expensive in Europe and the United States. If it works, it
could be a significant value catalyst for Tesla, a key point in Ark Invest and
Cathie Wood’s investment thesis. The big question now is whether Tesla can
deliver the product on time.
That said, there are still risks. Any delays in the
RoboTaxi rollout could hurt the stock. Further geopolitical tensions —
especially between the U.S. and the EU — could also pose a threat to Tesla’s
global operations. And while Musk may be refocusing on the company, that
doesn’t guarantee a quick rebound in vehicle demand. At the end of the day,
Tesla has always been more of a speculative play than a fundamentally grounded
one.
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