Tesla CEO Musk was in the headlines for humanitarian reasons last week. Musk activated the Starlink internet service in Ukraine and delivered a shipment of terminals after a Twitter request by the Ukrainian Vice Prime Minister.
Amazing times we’re living in. If anyone had tried to tell you 10/15 years ago ago that company CEO’s and politicians would converse openly on social media to arrange conflict support, they’d have been laughed out of the room. Yet here we are.
Back to markets. Tesla’s share price hasn’t been immune to the recent volatility. It’s now sitting at a critical juncture having reclaimed ground above the 200 day moving average (200DMA), and is banging on the technical resistance to the upside.
Musk continues making the right moves to secure battery metals too. Australia’s Core Lithium Ltd announced an agreement to supply Tesla with 110,000 dry metric tonnes of Lithium over four years. Supply is expected to start in the second half of 2023.
In recent months, the EV maker has already secured battery metal supply deals with Liontown Resources. Tesla also secured a deal to buy the majority of the graphite produced by the projected expansion of the Syrah Resources facility in Vidalia.
Major macroeconomic factors will come into play.
Joe Biden took the stage for his State Of The Union address overnight. The number one problem facing the nation is inflation.
Biden said:
"I get it,"
"That’s why my top priority is getting prices under control."
He also spoke of “building a better America” and highlighted the investment in electric vehicles made by a couple of America’s oldest car manufacturers on his Twitter account:
Ford is investing $11B to build electric vehicles—creating 11,000 jobs across the country.
GM is making the largest investment in its history—$7B to build electric vehicles, creating 4,000 jobs in Michigan.
Not for the first time, there was no mention of Tesla… Elon bit back:
“Tesla has created over 50,000 US jobs building electric vehicles & is investing more than double GM + Ford combined”
Analysts often point to Tesla’s lack of employment unions as a factor. Although Tesla employs 50,000 US workers, GM employs 85,000. Approximately 50% are represented by Unions. Ford has approximately 57,000 Union workers.
Maybe it’s simpler than that. Musk isn’t part of the old guard so no political favour is owed. Who really knows?
One thing that looks likely is a long battle against inflation. Interest rates look almost certain to rise at the Fed’s March meeting, and the ‘excuses’ that inflation is mainly supply-driven could be wearing thin.
From a political perspective, “something must be done” and interest rates are the primary tool for policymakers to tackle inflation.
Biden addressed this in the speech too:
"...while you’re at it, confirm my nominees to the Federal Reserve, which plays a critical role in fighting inflation."
Higher interest rates could be a significant headwind for Tesla’s share price. Risk premiums and discount rates tend to increase as the time value of money comes into play.
Not investment advice. Past performance does not guarantee or predict future performance.
