With the election over and a new president chosen, how can Tesla (TSLA, Financial) benefit from the new agenda? The Nasdaq and tech stocks in general have been hurt as opposed to financials; investors are assuming that industrials and oil companies will prosper under the new administration.
One stock that has been falling fast would have to be Tesla. It is lumped into the tech field of stocks, but is it really? If you don’t know the company, you wouldn't know that its plan is to function as an industrial.
The vehicles are not going to be the highest margin portion of Tesla’s operations; it’s the industrial batteries that can be applied to manufacturing that will either make or break the company. Most individuals have sold off Tesla on the premise that President-elect Donald Trump will lift the global emissions initiatives and shrink the expected market shares of electric vehicles in 2020. Maybe, maybe not. Let's not forget that states will still have the ability to subsidize and control the emissions of registered vehicles. But that’s speculative as of right now.
Tesla has already won contracts to supplement power grids in California with industrial lithium-ion batteries and use them to store energy in their self-sustaining Gigafactory in Reno, Nevada, powered mostly by wind turbine and solar energy stored in the aforementioned batteries. Another interesting note post election is the dollar continues to rise, as do Treasury yields. My previous article on insourcing versus deflation can be found here, and alternative energy and energy storage should be more heavily centered on the manufacturing applications than the vehicle ones.
With currency depreciation already occurring in manufacturing-based countries, we need to fight the war against foreign currency deprecation if we have a shot at both bringing jobs back and decreasing the deficit. Remember, the U.S. deficit is the difference between imports and exports, the transfer of wealth from nation to nation. If others cannot afford our products, it will be hard to maintain our assumed job creation in the future. The global market is as important as the domestic.
But I have no doubt we can do it. Decrease overhead operating costs, namely utilities, and increase automation. Trade schools to assist in learning automation are also vital. Putting factories in strategic areas of solar and wind paths in conjunction with the storage batteries being produced by Tesla can be a road to this outcome. Telsa’s merger with SolarCity (SCTY) puts it at the forefront to corner this market in the U.S. together with Panasonic (PCRFY, Financial), the partner to the Gigafactory.
Policies will be altered, but we have to come back to the middle on some items. Tesla has the goal of being an industrial company, and its strategy could be falling right into the perfect amalgamation of elements to assist both the left and the right. If it keeps falling in line with other tech companies, and if we assume future sales projections will be in line with this plan, its stock is looking more and more attractiveÂ
Disclosure: The author holds no positions in Tesla or Solar City. The author is long Panasonic.
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