U.S. President Donald Trump has thrown a lifeline to Tesla (TSLA), saying he doesn’t plan to “destroy” the electric vehicle maker by taking away its government subsidies.
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“Everyone is stating that I will destroy Elon’s companies by taking away some, if not all, of the large scale subsidies he receives from the U.S. Government,” wrote President Trump on social media. “This is not so! I want Elon, and all businesses within our Country, to THRIVE, in fact, THRIVE like never before!”
The comments from the U.S. president come on a day when TSLA stock is down 9% following disappointing second-quarter financial results and a grim outlook from CEO Elon Musk. On an earnings call July 23, Musk said that more difficulties could be ahead for Tesla as President Trump’s recently approved tax and spending bill ends a $7,500 electric vehicle tax credit at the end of September.
Trump appeared to refute that the subsidies will end for Tesla and other electric vehicle makers in coming months, writing: “The better they do, the better the USA does, and that’s good for all of us.”
Regulatory Credits
Tesla relies heavily on automotive regulatory credits. In Q2 of this year, Tesla’s automotive sales fell 16% year-over-year to $16.7 billion. Of that amount, revenue from automotive regulatory credits dropped to $439 million from $890 million a year earlier.
Tesla is also struggling with rising competition in key markets such as China and Europe, especially from low-cost Chinese electric vehicles. The company has also faced a consumer backlash in Europe and North America over the politics of Musk and his involvement with the administration of President Trump.
Earlier in July, Tesla reported a 14% year-over-year decline in its vehicle deliveries to 384,000 units for the second quarter. TSLA stock is down 25% this year.
Is TSLA Stock a Buy?
The stock of Tesla has a consensus Hold rating among 32 Wall Street analysts. That rating is based on 13 Buy, 12 Hold, and seven Sell recommendations issued in the last three months. The average TSLA price target of $299.52 implies 9.81% downside from current levels.
