Tesla stock (NASDAQ:TSLA) has surged by close to 20% over the past five trading days and remains up by around 32% over the past month. Lots of things have driven Tesla higher, including CEO Elon Musk’s renewed involvement in Tesla as well as potential easing of the U.S.-China trade tensions following negotiations over the last weekend. Separately, see Why Is SMCI Rising?
Progress With China Trade Talks
U.S.-China trade tensions have eased considerably since last weekend. While the tit-for-tat tariff escalation with China in April resulted in Chinese reciprocal tariffs of 145% and China’s imposition of a 125% tariff on U.S. goods, these numbers have come down considerably. U.S. tariffs on Chinese goods were reduced to 30% for a period of 90 days, while Chinese tariffs on U.S. goods were lowered from 125% to 10%. Although Tesla manufactures most of the vehicles it sells in China at its Shanghai plant, with only its lower-volume Model S and X being imported to China, the thawing trade tensions will be a positive for the company. Lower tariffs could reduce the cost of imported components used in Tesla’s U.S. manufacturing operations, while also minimizing the risk of future retaliatory measures that might impact its operations in China.
Musk Balancing Tesla And Washington
Elon Musk has been closely involved with the new Department of Government Efficiency (DOGE), a high-profile role in the Trump administration since the new administration took office. However, Musk has indicated that he would considerably scale back on his role from May, spending one to two days per week on the project while dedicating more time to Tesla. While Musk has stepped back from his full-time gig, his influence within the White House appears to be very much intact. This was on full display during the President’s ongoing visit to Saudi Arabia, where Musk appears to be among the most visible members of the U.S. team alongside the President. Musk’s companies continue to benefit from his close relationship with the U.S. president. Musk said that his satellite internet company, Starlink, received approval for maritime and aviation use, while Saudi Arabian officials indicated that Tesla’s robotaxis could be coming to the kingdom. The visit likely reinforced investor confidence in his continued influence and access to key decision-makers, despite his deeper involvement in Tesla. With Musk back at the helm, here’s how Tesla stock can surge to $1500.
Auto Import Tariffs Net Positive For Tesla
While President Trump has walked back some of his tariff impositions over the past month or so, the auto tariffs remain largely intact. A 25% tariff on all imported passenger vehicles and light trucks has been in place since early April, while tariffs on certain imported auto parts took effect on May 3, 2025. Tesla could be a net beneficiary of these new tariffs, or at least less impacted than its competitors, though this may only be temporary. Tesla builds all the vehicles it sells in the U.S. at factories in California and Texas, so its vehicles won’t face tariffs. Meanwhile, competitors, including GM and Ford, manufacture some of their EVs in Mexico and could see steeper price hikes. This could make Tesla vehicles more competitively priced versus rivals as the full effect of tariffs is felt in the U.S.
Tesla Stock’s Volatility
The increase in TSLA stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 50% in 2021, -65% in 2022, 102% in 2023, and 63% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period.
Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, and less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could TSLA face a similar situation as it did in 2022 and underperform the S&P over the next 12 months – or will it see a strong jump?
There are still a lot of headwinds for the stock. Demand for vehicles is sluggish globally. Competition in the EV market is heating up with Chinese EV players gaining ground in international markets, while Tesla’s weakening brand image, sharply declining resale values, and saturation of early adopters in the EV market are hurting sales in the U.S. For perspective, vehicle deliveries fell by 22% year-over-year in Q1 in China. The company also saw its sales drop in European markets. Sales in Germany, for instance, declined by over 60%, according to data from Reuters. Tesla’s recent refresh of its best-selling Model Y was poised to help deliveries recover. But this might not be happening, as the vehicle has been seeing very attractive promotions, including 0% financing, with delivery lead times also being extremely short. This indicates that demand may not be too strong.
Tesla’s valuation after the recent rally is hardly cheap. The stock trades at a lofty 170x consensus 2025 earnings, and it might take quite a bit of time for the company to grow into this rich valuation. See our analysis on Tesla Valuation: Is TSLA Stock Expensive Or Cheap? for more details on Tesla’s valuation and how it compares with peers. For more information on Tesla’s business model and revenue trends, check out our dashboard on Tesla Revenue: How Does TSLA Make Money?