Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
Tesla Tsla CEO Elon Musk and US President Donald Trump have issued statements on their respective social media platforms. Musk is not in favor of the US budget Trump wants to pass. Tesla stock fell by more than 14% on June 5th.
Why it matters: The US Expenditure Bill includes the expiration date of the $7,500 electric vehicle subsidy at the end of 2025, seven years before it expired.
All Tesla vehicles sold in the US are currently eligible for subsidies, so if the expiration of the subsidies increases consumer prices, Tesla could face a decline in sales volume. This could have more impact on the SpaceX of the mask than Tesla. However, if Trump retaliates against Musk, Tesla could be ruled out of his ability to sell emissions credits.
Conclusion: For now, we maintain a fair value estimate of $250 for each narrow moat Tesla share. Before the sale on June 5th, the company was overvalued on its two-star territory. At current prices, Tesla believes he is well valued, with stock trading looking at fair value estimates in the 3-star area under 15%.
If early EV subsidies expire in law, you may be weighing Tesla delivery in 2026. We expect this to affect all EV producers’ lower sales volumes, as well as the decline after the removal of EV subsidies in other markets. Long-term EVs reach cost parity with internal combustion engines, and sufficient fast charging is built along highways and across cities, and consumer demand encourages adoption rather than subsidies.
Big picture: The expiration of the grant allowed us to weigh Tesla delivery in 2026. But in the long run, we believe Tesla’s autonomous driving software can prove to be a differentiator that could lead consumers to choose their vehicle.
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