Jim Cramer has advocated for owning Tesla stock, emphasizing its value not due to reported plans by President-elect Donald Trump to relax U.S. self-driving regulations, but primarily because of Tesla CEO Elon Musk.
The Strength of Tesla
Jim Cramer explained that while a national mandate for self-driving vehicles may not seem imminent, the case for Tesla remains robust. He pointed out that Musk’s leadership and vision ensure the company’s continued appeal to investors. Cramer suggested that the so-called Musk premium could yield benefits in other ways, such as securing favorable municipal policies or expanding Tesla rental stations near federal highways.
On Monday, Tesla’s stock surged by 5.62% following a report that Trump’s transition team is considering implementing a federal framework for self-driving cars. If enacted, such a framework would facilitate the broader rollout of autonomous vehicles, a significant milestone for Tesla and Musk, who has long envisioned deploying a fleet of autonomous robotaxis. Musk, a key Trump ally and major campaign contributor, has already been tapped to lead a new government efficiency task force to cut regulations, reduce waste, and restructure federal agencies.
Challenges to Autonomous Vehicle Plans
Despite the optimism, Jim Cramer noted that implementing federal rules for self-driving vehicles might be more complex than it appears. He highlighted the need for state and local governments to align with federal regulations, making it unlikely that autonomous vehicles could be greenlit nationwide with a single policy change.
The notion that the federal government could swiftly authorize self-driving cars across the country, he argued, is overly simplistic. However, he emphasized that Tesla’s prospects remain strong regardless of regulatory hurdles.
The Elon Premium
Jim Cramer also underscored the role of what analysts have dubbed the Elon premium in Tesla’s success. Musk’s involvement in Trump’s campaign and his elevated status as a global influencer have bolstered investor confidence in Tesla. Analysts have also noted that Tesla’s stock often moves in tandem with Musk’s other ventures, such as SpaceX, further reinforcing the CEO’s pivotal role in the company’s valuation.
Tesla distinguishes itself from other electric vehicle manufacturers by positioning itself as a technology company rather than a traditional automaker. This distinction, Cramer noted, allows Tesla to command significantly higher price-to-earnings multiples compared to its competitors, with little concern from investors.
Tesla’s Unique Position
Jim Cramer concluded by reiterating that Tesla’s focus on technology, rather than solely on automotive manufacturing, sets it apart from its peers in the EV industry. This unique positioning and Musk’s leadership continue to drive Tesla’s appeal in the market.
As Tesla’s stock continues to climb, investors remain optimistic about the company’s future under Musk’s guidance, even amidst regulatory uncertainties and broader industry challenges.
