Tesla stock has increased by more than 24% in the past month. While still far from the highs of $480 per share reached in March, investors seem to have regained optimism, and surprisingly so. Last week, news broke that Tesla's sales in China had declined for seven consecutive months. In addition, new car sales in the U.K. fell 62% year-on-year in April. Why the sudden turnaround in sentiment?
The main reason, as expected, is the renewed hope for future improvements.
First, news broke in April that Elon Musk plans to reduce his work at the Department of Government Efficiency (DOGE) to just one or two days a week starting in May. The rest of his time, he said, will be focused on his “business interests,” particularly Tesla. Investors have welcomed this renewed focus on the company.
Second, tensions between the United States and China have eased slightly. The two countries recently agreed to a temporary 90-day tariff truce while they work to reach a broader trade agreement. Under the agreement, the U.S. will reduce tariffs on Chinese imports from 145% to 30%, while China will lower tariffs on U.S. imports from 125% to 10%. Theoretically, Tesla could benefit from the resulting drop in tariff-related inflation.
The third catalyst is Tesla's plan to launch its autonomous driving software in Austin, Texas, next June. If the RoboTaxi model is successful, it could give Tesla a technological monopoly, resulting in significant cost savings for the cab industry. The RoboTaxi could drive strong domestic demand before expanding to other OECD countries because cabs are expensive in Europe and the United States. If it works, it could be a significant value catalyst for Tesla, a key point in Ark Invest and Cathie Wood's investment thesis. The big question now is whether Tesla can deliver the product on time.
That said, there are still risks. Any delays in the RoboTaxi rollout could hurt the stock. Further geopolitical tensions — especially between the U.S. and the EU — could also pose a threat to Tesla’s global operations. And while Musk may be refocusing on the company, that doesn’t guarantee a quick rebound in vehicle demand. At the end of the day, Tesla has always been more of a speculative play than a fundamentally grounded one.
