Musk's vision and tariffs boost Tesla's stock recovery

The overall improvement in market sentiment boosted Tesla's stock. Investors are hoping that President Donald Trump will not impose punitive tariffs on imports from Mexico and Canada in April. Tariffs are especially challenging for car manufacturers who source many components from these countries.

According to Reuters, Tesla is preparing to introduce its most advanced driver assistance system, known as Full Self-Driving (FSD), to the Chinese market. This information appeared on the social media profiles of the company's Chinese employees. Enhanced autonomous driving features may help Tesla increase vehicle sales, although the company charges several thousand dollars for these features, while Chinese competitor BYD offers similar solutions almost for free.

The willingness of Chinese consumers to pay for the FSD system and its impact on Tesla's market share in China will be closely monitored by investors. The introduction of FSD in China was anticipated, and the company also plans to introduce this technology in Europe later this year. While the development of FSD could bring advantages, some early gains in Tesla's stock likely result from a rebound after significant declines.

On Friday, Tesla shares initially increased by 5.3%. The rise was already oscillating around 10%. The rebound is crucial because last week marked the ninth consecutive week of declines for the company's stock, the longest negative streak in Tesla's trading history.

A previous increase following the presidential elections contributed to later corrections - from the elections on November 5 to mid-December 2024, the stock rose from about $250 to $490 (CAD 356 to CAD 702). Investors believed that the second Trump administration would benefit the car manufacturer, mainly through regulations that facilitate the introduction of autonomous vehicles.

Since the January inauguration, when Tesla's stock began to decline, investors have become more focused on the political activities of CEO Elon Musk and how they may discourage traditional Tesla buyers—people with left-leaning views interested in environmentally friendly solutions.

Friday's jump followed a meeting between Musk and Tesla employees. For Wall Street, it was enough that he concentrated on the car company rather than his fiscal duties in Washington. Gary Black, co-founder of the ETF Future Fund Active, noted that "Investors roundly cheered Elon’s vision, confidence, spirit, and calmness in praising employees for their efforts during the current media storm."

Wedbush analyst Dan Ives added that the speech "made a huge step forward in our view" and noted that many showrooms in the United States seem to be attracting new Tesla buyers. As a result of all this volatility, shares held at around the same level before Monday's trading, although early gains still left Tesla's stock about 37% lower since the presidential inauguration on January 20.

In the coming days and weeks, further sales data will impact evaluations. Later this week, the European Automobile Manufacturers Association will release monthly sales data. In January, Tesla's sales in Europe fell by 45% compared to the previous year, partly due to a model change—Tesla is introducing a new version of the Model Y.

Then, on April 2, Tesla will present its first-quarter sales results. Wall Street expects sales of 414,000 vehicles, according to FactSet. However, the latest analyst estimates are closer to 360,000. In the first quarter of 2024, Tesla delivered 387,000 cars.