Tesla could see 40% of its profits evaporate when Trump takes office, JPMorgan warns

Tesla's Challenges in 2024 - Tesla faces potential challenges under a second Trump administration, despite CEO Elon Musk's relationship with the president-elect [1] - JPMorgan warns of potential trouble ahead for Tesla, estimating that 40% of Tesla's profits could be at risk due to Trump's proposals to remove EV tax credits and subsidies [2] - Tesla reported a drop in annual vehicle sales for the first time in 2024, with 1.79 million cars sold, down slightly from the previous year's record of 1.8 million [4] Market and Demand Slowdown - Tesla is experiencing a slowdown in demand, with consumers gravitating toward more affordable and practical hybrids [4] - Analyst Ryan Brinkman notes that Tesla does not appear on track to dominate the global auto industry amidst the electrification transition [3] - The slowing of deliveries ahead of a likely subsidy removal could refocus investors on the deterioration in deliveries, revenue, gross profit, EBIT, EPS, and FCF estimates [6] Impact of Regulatory Changes - Trump's proposed cuts to EV subsidies could cost Tesla $3.2 billion, as government subsidies account for a reliable minority of Tesla's revenue [7][9] - Tesla's regulatory credits business has provided a reliable cash flow, with the company benefiting from competitors purchasing its extra regulatory credits [8] - Tesla's most affordable vehicle, the Model 3, benefits from the $7,500 tax credit under the Inflation Reduction Act [8] Stock Performance and Investor Sentiment - Tesla shares dipped 6% following disappointing fourth-quarter sales results [2] - The stock rebounded slightly on Friday morning, up about 4% in morning trading [8] - Brinkman reiterated a bearish $135 price target for Tesla's stock, warning that Thursday's sales results should be a wake-up call for investors [5][6]