(Yahoo! Finance) - Tesla (TSLA) stock sank as much as 3% Tuesday, reversing premarket gains on the first trading day since the inauguration of Donald Trump after the president scrapped a pro-EV policy put into place by his predecessor in an executive action late Monday.
On his first afternoon in office, Trump wasted no time shedding the skin of the outgoing administration, revoking 78 executive orders made by former President Joe Biden during his tenure. One of those Biden-era policies that was revoked mandated that half of the new US cars manufactured be electric by 2030.
Other electric vehicle stocks fell on the news. Lucid (LCID) tumbled nearly 7%, while Rivian (RIVN) slid 5%. Meanwhile, General Motors (GM) and Ford (F) stocks were up.
Tesla ended Tuesday down nearly 1%.
Trump also directed his administration to consider the elimination of what he called “unfair subsidies” and “other ill-conceived government-imposed market distortions that favor EVs.” The Biden administration had issued grants and extended tax credits with funding from the Inflation Reduction Act — much of which went to red states — aimed at bolstering the electric vehicle industry and promoting clean energy to combat climate change. The first EV tax credit was passed under former President George W. Bush.
"[EVs] are a rapidly growing market and relatively new technology, but [loss of the EV tax credit] is not trivial. I mean, $7,500 is not trivial,” Joseph Shapiro, UC Berkeley associate professor of economics, told Yahoo Finance in November.
Tesla CEO Elon Musk, a close confidant of the president, said last year his company wouldn't take a hit like other EV makers from the rollbacks.
“I guess that there would be, like, some impact, but I think it would be devastating for our competitors and for Tesla slightly,” Musk said on a call with analysts after Tesla’s second quarter earnings report in July. “But long term probably actually helps Tesla, would be my guess, yes … the value of Tesla overwhelmingly is autonomy.”
Despite Tuesday's decline, Tesla shares have soared recently as part of the so-called Trump trade, and the stock is up more than 60% since Trump's election victory in November. This rally comes despite Tesla reporting an annual sales decline in January for the first time in more than a decade.
Piper Sandler analyst Alexander Potter on Monday raised his price target on Tesla stock to $500 from $315, citing his belief that Tesla will shift away from launching new EVs and instead focus on "popularizing" its autonomous driving software called Full Self-Driving (FSD).
While Potter said that while he previously expected Tesla to reach production of more than 8 million EVs per year, more than quadruple the 1.8 million vehicles it manufactured in 2024, he now sees the EV company maxing out at making 4.6 million vehicles per year by 2032.
As Yahoo Finance's Yasmin Khorram previously reported, the market for self-driving cars could be incredibly lucrative for Tesla in the future, but the Musk-helmed company has a long way to go.
FSD still requires a human at the wheel, and it only contributed about $330 million to Tesla’s third quarter earnings. In recent months, federal regulators have also opened two separate investigations into Tesla's autonomous driving software after several crashes.
Some Tesla bulls, however, are looking to Trump to create a friendly regulatory environment for autonomous driving.
Wedbush analyst Dan Ives said in a December note to investors that he expects, "the federal regulatory spiderweb that Musk & Co. have encountered over the past few years around FSD/autonomous clears significantly under a new Trump era.”
Tesla will release fourth quarter earnings on Jan. 29.
