Why Tesla Stock Is Soaring Today
Shares of Tesla (TSLA 8.73%) are climbing on Friday. The electric vehicle (EV) maker’s stock had gained 8.7% as of noon ET. The rise comes as the S&P 500 was mostly flat and the Nasdaq Composite rose modestly.
What’s fueling the optimism? Late yesterday, the Trump administration announced regulatory changes that could help Tesla achieve its self-driving ambitions sooner.
Relaxing the rules
The Transportation Department announced it will loosen some of its rules to help U.S. automakers deploy self-driving cars more quickly. The administration appears eager to beat China in a race to develop the next-gen technology. The new rules allow for exemptions from certain federal standards for safety testing, and crash reporting requirements for self-driving software will be streamlined.
“We’re in a race with China to out-innovate, and the stakes couldn’t be higher,” Trump’s transportation secretary, Sean Duffy, wrote in a statement, claiming the rule changes will “slash red tape and move us closer to a single national standard.” Investors appeared to believe the new framework will speed up Tesla’s full self-driving timeline.
Make or break?
The announcement comes at a critical time for Tesla. The company has seen its sales plummet across key markets even as EV sales at large are on the rise. In the company’s recent earnings call, Elon Musk said he would devote more time to his duties as CEO after investor discontent grew; many view his role in the Trump administration as taking away from his ability to effectively lead Tesla. And there’s been consumer backlash to Musk’s government-cutting moves.
Tesla is facing increased competition from Chinese EV makers like BYD as well as legacy carmakers. It appears that the early dominance Tesla once enjoyed has eroded, but delivering on Musk’s long-standing promise of full self-driving abilities in Teslas would undoubtedly help the company regain an edge. The question is when will this happen. I’m not convinced it will be anytime soon, and I continue to think the stock is overvalued.
Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.