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Tesla at the Crossroads of U.S. Trade Policies
Tesla has warned that it will suffer from the Trump administration’s tariff policies, which are making it harder to source key components domestically. In a letter to U.S. trade representative Jamieson Greer, the electric vehicle giant stated that despite its efforts to localize the supply chain, some parts remain impossible to source within the U.S. This could lead to higher production costs and, in turn, increased prices for Tesla’s cars.
The company urged the government to reassess supply chain limitations, arguing that manufacturers should not be unfairly burdened by trade actions that make critical components prohibitively expensive. Tesla also pointed out that retaliatory tariffs from countries like Canada are already affecting its exports.
Ironically, on the same day this letter was sent, President Donald Trump showcased his support for Tesla by purchasing a Deep Red Model S Plaid. The White House event saw Trump exploring Tesla’s lineup, including the Cybertruck and Model Y, before finalizing his decision. Despite the warm relations between Musk and Trump, the letter underscores the reality that business challenges persist, even with political alliances.
Tesla has already raised its prices in Canada as a response to tariffs. Meanwhile, U.S. customers have seen minor price increases across Tesla’s lineup, including the flagship Model X. The Trump administration’s aggressive tariff stance has sparked countermeasures from Canada, affecting the electric supply in certain northeastern states.
Trump’s Growing Admiration for Tesla
Trump has been vocal in his praise for Musk and Tesla, calling him a “genius” and the company a symbol of American innovation. He highlighted the advanced manufacturing processes at Tesla’s plants and noted how Tesla owners are often blown away by their cars. Regarding the Cybertruck’s unconventional design, Trump expressed admiration for Musk’s bold creativity.
Tesla’s Stock Outlook: A 90% Rebound on the Horizon?
Tesla’s stock has seen a steep 50% drop since its December 2024 high, but Morgan Stanley analyst Adam Jonas believes this is a buying opportunity. He predicts that Tesla’s stock could rebound by 90% within the next year, citing its advancements in artificial intelligence and Full Self-Driving (FSD) technology as key growth drivers.
Jonas maintains an “overweight” rating on Tesla, with a price target of $430. While acknowledging challenges such as declining sales and negative media coverage, he believes that Tesla’s strong AI capabilities could fuel a major recovery.
In a bullish scenario, Tesla could reach $800 per share within the next 12 months, particularly if its FSD technology gains wider adoption. On the downside, Jonas sets a bear-case target of $200 per share.
Tesla’s UK Sales Surge Despite Musk Controversy
In the UK, Tesla’s sales surged by 20% in February, with nearly 4,000 new cars hitting the roads. The Model 3 and Model Y ranked among the country’s top three best-selling vehicles, despite concerns that Musk’s political controversies might hurt demand.
EV registrations in the UK jumped by 42% in the same period, and Tesla’s market share rose from 3.75% to 4.6%. This growth comes even as the broader car market shrank by 1%. However, industry experts warn that maintaining this momentum may become costly for manufacturers, who are heavily subsidizing EV sales to sustain market interest.
What Undercode Says:
Tesla finds itself in a complex political and economic landscape. While Trump’s endorsement of Tesla suggests a favorable relationship, the administration’s tariff policies could significantly impact Tesla’s bottom line.
Tesla’s Business Challenges and Strategies
1. Tariff Pressure on Supply Chain:
- Tesla’s reliance on global supply chains makes it vulnerable to trade restrictions. Even with efforts to source parts locally, some components remain unavailable in the U.S.
- Higher production costs could push Tesla to either absorb the losses or pass them onto consumers.
2. International Market Responses:
- Canada’s retaliatory tariffs highlight how trade disputes affect global markets. Tesla’s decision to increase prices in Canada suggests the company is adjusting rather than absorbing costs.
- European markets have been volatile, with Tesla’s sales halving in January, yet rebounding in the UK. This indicates that while demand exists, regional market dynamics play a crucial role in Tesla’s performance.
3. Stock Market Volatility:
- Tesla’s stock performance has been a rollercoaster, largely influenced by external factors such as political controversies and media narratives.
- Analysts remain divided—some see Tesla as undervalued, while others predict a further crash. The success of Tesla’s AI-driven projects, such as Full Self-Driving, could be a major turning point.
4. Elon Musk’s Influence on Tesla’s Image:
- Musk’s outspoken political and social opinions have led to a polarized consumer base. While some remain loyal, others hesitate to support the brand.
- However, sales data from the UK suggests that Tesla’s product appeal outweighs Musk’s controversies for many buyers.
Future Outlook for Tesla
– Short-Term Risks:
- The company faces regulatory challenges, global economic uncertainties, and fluctuating demand.
- Tariffs could force Tesla to adjust its pricing strategy, affecting affordability and sales volume.
– Long-Term Potential:
- Tesla’s advancements in AI and autonomous driving could be game-changers, especially if it successfully launches an autonomous rideshare service.
- As EV adoption grows globally, Tesla remains well-positioned as a market leader, provided it navigates political and economic challenges effectively.
Fact Checker Results:
- Tesla’s tariff concerns are legitimate: The letter to the U.S. trade representative confirms that Tesla is struggling with sourcing parts domestically, which aligns with broader supply chain issues affecting many industries.
Trump did buy a Tesla Model S Plaid: Multiple sources confirmed the President’s purchase, and he openly praised the company and its products.
Tesla’s UK sales data is accurate: Official reports from the Society of Motor Manufacturers and Traders (SMMT) confirm Tesla’s strong February sales, despite concerns about Musk’s reputation impacting demand.
References:
Reported By: https://www.teslarati.com/tesla-will-be-victim-trump-admin-tariff-strategy/
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