Musk and his Model 3 are on a roll
IT’s a good time to be Elon Musk.
Shares of the billionaire’s Tesla Motors have surged 40% since December 1, putting the stock within reach of a 52-week high. The acquisition of SolarCity is complete. Musk’s sprawling Gigafactory is now producing battery cells. And the cleanenergy evangelist has the ear of a surprising fellow in Washington: President Donald Trump.
It’s a big turn of fortune from 2016, when scepticism was mounting that Musk could juggle his ambitious goals. Tesla’s shares crossed above analysts’ 12-month price target as of this week and are trading at about $254 (R3 359), the highest since April.
One reason for the surge — progress towards production of the mass-market Model 3 electric car by year-end — has also burnished Musk’s appeal as an adviser to the new president.
“Tesla is a poster child for Made in the USA, and the one thing that is a clear focus for Trump is creating manufacturing jobs,” said Ben Kallo, an analyst at Robert W Baird. “Investors want to own the stock ahead of the Model 3 launch.”
Tesla’s cars are all produced in the US — the company is based in Palo Alto, California — so Trump’s threats to tax imports could be a boon to the SEAT AT THE TABLE: Elon Musk serves on US President Donald Trump’s economic advisory board maker of electric vehicles and energy-storage devices.
Tesla, which has 25 000 workers in the US, builds vehicles in Fremont, California; its Gigafactory lies in a Republican congressional district in Nevada; and it has partnered with Panasonic to produce solar cells and panels from midyear in Buffalo, New York. The rockets launched by Musk’s closely held Space Exploration Technologies Corporation are all made at SpaceX headquarters in Hawthorne, California.
Musk serves on the US president’s economic advisory board and regularly meets with either Trump or his top aides. He was one of a dozen CEOs who met with Trump at the White House on Monday to talk manufacturing, taxes and trade.
“Elon Musk has an important line of communication to Donald Trump,” Morgan Stanley analyst Adam Jonas wrote in a note last week as he raised his price target to $305 from $242. “This strategic relationship between Tesla leadership and the new administration is an important development.”
Analysts remain split on Tesla’s prospects — eight call it a buy, 10 a hold, and six a sell — as Musk works to transform it from a niche seller of highpriced electric vehicles into a high-volume manufacturer making 500 000 cars a year from 2018.
Fourth-quarter deliveries fell short of its own forecasts, and the company has a history of setting aggressive deadlines and missing them due to production delays. Tesla sold just 76 230 vehicles in 2016, below the 80 000 to 90 000 it had targeted. Meanwhile, the factory in Fremont is still being retooled for the Model 3.
Musk, 45, and Trump, 70, may seem an odd pair. Before the election, the South African-born entrepreneur said on CNBC that Trump “doesn’t seem to have the sort of character that reflects well” on the US and urged people to revolt and fight the “propaganda” of the fossil fuel industry.
Trump chose former Exxon Mobil CEO Rex Tillerson to be his secretary of state and Scott Pruitt, an ally of the oil and gas industry, to lead the Environmental Protection Agency.
Even so, there is clearly room for common ground. Musk shocked some of his loyal customers on Tuesday when he declared on Twitter that Tillerson “has the potential to be an excellent Sec of State”.
Asked to elaborate, Musk said: “Rex is an exceptionally competent executive, understands geopolitics and knows how to win for his team. His team is now the USA.” Both Musk and Tillerson have expressed support for a tax on carbon emissions.
Musk raised the prospect of a carbon tax directly with Trump and US business leaders at Monday’s meeting but got little or no support among the other executives in attendance, a senior White House official said.
Musk’s support for Tillerson drew a plea from Michael Mann, a climate scientist whose claim to fame includes the paper outlining the so-called hockey-stick chart of temperature data. “You are a hero to so many climate activists Elon,” Mann tweeted. “Please don’t lend your imprimatur to an Exxon Mobil-driven foreign policy.”
Policy differences aside, the recent stock surge suggests investors consider it wise for Musk to have a seat at the table.
“Elon is being pragmatic,” said Joe Dennison of Zevenbergen Capital Investments in Seattle. “The administration’s focus on domestic manufacturing plays into Tesla’s hands. It’s a positive that Elon and Tesla are being recognised for the role they are playing.” — Bloomberg