Tesla Inc.'s key figure Elon Musk has finally responded to leaving DOGE. According to Bloomberg, Musk recently responded that he will "significantly" reduce his involvement in the U.S. government's "Department of Government Efficiency" (DOGE) starting next month, which triggered a surge in TSLA and Doge.
Musk's Return to Tesla
Musk's recent involvement in DOGE has significantly undermined Tesla investors' confidence. During the recent earnings call, he vowed to invest "far more time in Tesla" than before, stating that the phase-specific mission in the government department is "largely completed".
In recent years, in addition to leading Tesla and SpaceX, Musk has prominently acquired and managed the social media platform X (formerly Twitter) and accepted an invitation from the Trump administration to lead the newly established Department of Government Efficiency. Many investors and analysts believe that Musk's work in Washington has dispersed his energy in managing Tesla, especially when Tesla is struggling with declining sales, rising costs, and pressures from Trump-era tariff policies. Additionally, Musk's participation in Trump's political activities and stance has triggered consumer backlash and protests.
Market Reaction Intense
The market responded positively to Musk's return commitment. Although Tesla's first-quarter financial report (adjusted earnings per share of 27 cents) was below analysts' expectations, and the company was rumored to have abandoned plans to mass-produce an affordable Model Y by 2026, dashing hopes of sales recovery in 2025, after Musk announced refocusing on Tesla, the company's stock still rose 5.1% in extended after-hours trading in New York, briefly exceeding the $250 level.
In the crypto market, Doge, associated with Musk, surged 12% today, indicating that the crypto market also believes Musk's return to Tesla might be a better choice than working in the U.S. Efficiency Department (also called DOGE).
Analysts' Perspectives
Many market analysts welcomed Musk's decision to refocus on Tesla. Gene Munster, managing partner at Deepwater Asset Management, stated that ending his government work amid declining automotive demand is "simple mathematics" and that "the core element needed to heal the (Tesla) brand is him stepping away from DOGE, which is truly necessary."
Brian Mulberry, portfolio manager at Zacks, also said that hearing Musk will soon "return to his normal role as company CEO" is undoubtedly "welcome news". These comments reflect Wall Street's general view that the challenges Tesla faces require full commitment from its founder and CEO.
Previously, during his political period, Dan Ives, an analyst at Wedbush Securities, wrote in a report earlier this week that due to the brand damage caused by Musk (and his DOGE work), Tesla might face a "permanent demand destruction of 15%-20% among potential future buyers", indicating potential customer loss for Tesla on the political front.
Future Outlook
Despite numerous challenges, Tesla and Musk continue to bet on technological innovation, particularly in autonomous driving, artificial intelligence, and robotics. With continuous progress in Full Self-Driving (FSD), many potential Tesla investors still see a promising future. Ark Invest's founder Wood added more shares during this year's low stock prices, showing that despite Musk's criticism, tech enthusiasts' high evaluation of the company's prospects remains unchanged.
Tesla reaffirmed that new car plans, including more affordable models, are still progressing as scheduled, expected to begin production in the first half of this year, refuting previous reports of delays. While details about the upcoming models remain scarce, Vehicle Engineering VP Lars Moravy stated that these new cars will be similar to other Tesla models. The company also mentioned using the Model Y remodeling downtime to prepare the factory for the new model's launch.
Additionally, the highly anticipated Robotaxi plan is expected to launch in June in Austin, Texas, initially deploying 10 to 20 vehicles, and development of the humanoid robot Optimus continues. In summary, regardless of Tesla's business trajectory, Musk's return is what makes investors believe "Tesla remains strong".
