EV Stocks in Turbulence: What Trump's Policy Could Mean for Tesla and Its Competitors

November 14, 1:22 pm

As the EV market faces yet another blow, investors in electric vehicle stocks find themselves navigating an increasingly risky landscape. The recent report that President-elect Donald Trump may end the $7,500 EV tax credit has already sent shares of major EV players into a tailspin. On Thursday, Tesla (TSLA) shares dropped nearly 6%, while Rivian (RIVN) plunged over 14%, and Lucid Group (LCID) slid 5%.

This anticipated policy shift could reshape the competitive dynamics within the EV industry. While Tesla has established a stronghold in the EV space with its profitable production model, and with Elon finding a friend in Donald Trump, its rivals may struggle more without the tax credit that has incentivized consumer adoption. Interestingly, Tesla has reportedly voiced support for ending the subsidy, which analysts speculate might stem from its competitive edge in a subsidy-free market. With its unmatched scale, longstanding profitability, and brand strength, Tesla could withstand the absence of these incentives far better than many of its smaller counterparts.

The Big Three automakers - Ford (F), General Motors (GM), and Stellantis (STLA) might also suffer setbacks if the credit is removed. Without government incentives, these legacy players could find their EV ambitions tempered by the allure of more profitable gas-powered vehicles, slowing the shift towards electrification.

AltIndex's Outlook: Tesla Still Shows Promise, but with Heightened Risk

At AltIndex, our data indicates Tesla as the lone EV stock holding a buy signal. However, volatility remains high for Tesla, and investors should weigh the potential risks associated with this evolving policy landscape. Trump’s prior commitments to reduce EV incentives add uncertainty, particularly regarding Tesla’s market resilience without the subsidy. For those willing to take the risk, Tesla’s scale and production efficiency could provide a relative advantage, but it remains a precarious space to be in.

Nikola’s Decline Reflects Broader Sector Challenges

Meanwhile, Nikola (NKLA) serves as a cautionary example of the challenges currently plaguing the EV sector. Nikola’s stock has plummeted to a 52-week low of $2.91, marking a 90.75% decline over the past year. This descent is largely attributed to a combination of production setbacks and broader market headwinds. AltIndex flagged a sell signal on Nikola as early as May, and since then, the stock has fallen an additional 70%. This downturn illustrates the vulnerability of many smaller EV players who lack Tesla’s scale and profitability, especially as they face both market competition and reduced government support.

What’s Next for EV Investors?

While there may still be selective opportunities in the EV sector, the removal of the $7,500 tax credit would add new hurdles for growth, particularly for companies heavily reliant on these subsidies. Tesla stands as one of the few resilient players, but it remains a volatile option, making this a sector suited for only the most risk-tolerant investors.

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