After it reported fourth-quarter earnings Wednesday night, Tesla (TSLA 0.73%) investors weren’t sure how to react. Shares bounced around yesterday before ultimately closing about 3% higher. That positive momentum continued today, and it wasn’t solely from investors digesting those results.
The stock jumped as much as another 5% today and was still trading 2.6% higher at 2:35 p.m. ET.
The tariff quandary
Reactions to Tesla’s fourth-quarter financial results were mixed. Competition and slowing demand growth led to lower vehicle pricing, which resulted in sales and earnings missing expectations.
But the stock rose anyway as eyes turned more toward the progress with Tesla’s self-driving software and the new products that could follow this year. In the investor conference call, CEO Elon Musk said the company will launch unsupervised self-driving electric vehicles (EVs) as a paid service for the first time this June. It will initially be limited to Austin, Texas, but that’s big news for shareholders. The company said it can then quickly launch the service in many other locations if all goes well.
But today’s stock jump also comes for another reason. Reports that the Trump administration will impose 25% tariffs on imports from Canada and Mexico beginning tomorrow are rattling many North American automakers. Auto giants like General Motors and Ford have production plants in both countries outside the U.S. Auto parts also flow back and forth as the supply chain supports vehicle production.
But Tesla supplies its U.S. customers from manufacturing plants in California and Texas. That could mean that some market share it has ceded to other automakers returns. Or at least its vehicles could become more competitive in price as tariff costs are passed on to consumers.
CNBC reports that factories in Canada and Mexico produce about 4 million vehicles annually destined for the U.S. But none are from Tesla. Now, Tesla’s domestic competitors might see tariffs imposed on imported parts for EVs from those countries. Those automakers will have to decide whether to accept higher losses on EVs or increase vehicle prices. Either way, it would benefit Tesla.
Howard Smith has positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.
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