Tesla stock has jumped over 16% this week and many investors are wondering why the surge in share price.
Tesla’s stock price has recently surged due to a combination of factors, including optimism about the company’s future in autonomous vehicles and robotics, and the easing of trade tensions between the U.S. and China. Additionally, investors are responding positively to Elon Musk’s plan to focus more on Tesla and less on his other ventures.
Friday capped another week of strong gains for the EV maker, marking the fourth week of straight gains as it battles to regain what it lost since its recent low on April 21st.
With the recent rally, Tesla stock is now down only 13% for the year, after plunging over 40% at one point.
One of the biggest pieces of news to drive these gains was the addition of Chipotle president Jack Hartung to the company’s board of directors. Hartung will be the ninth member of Tesla’s board and will join the company on June 1.
Hartung will retire from his role at Chipotle on the same day and transition to a senior adviser role at the Mexican fast-casual chain.
A report on Wednesday by The Financial Times revealed that Tesla’s board has formed a special committee to explore a new pay package for CEO Musk, with stock options potentially on the table.
The Financial Times said the special committee is made up of chair Robyn Denholm and board member Kathleen Wilson-Thompson. The committee will also explore “alternative ways” to compensate Musk for past work should Tesla fail to reinstate Musk’s prior 2018 pay package, which is on appeal with the Delaware Supreme Court.
It was last year that the CEO’s package was struck down by a Delaware court as the Judge found that Tesla’s board did not act in the best interest of company shareholders and that the package showed “barely any evidence of negotiations at all.” The all-stock pay package, worth around $56 billion at the time of exercise.
Musk’s decision to dedicate more time to Tesla and reduce his involvement in other ventures has also been met with positive investor sentiment, indicating a renewed focus on the company’s core business.
The CEO’s affiliation with President Trump and far-right positions has led to criticism and with the Tesla brand being damaged. Musk and his team have been rebuked for their decisions with the Department of Government Efficiency (DOGE). His involvement has sparked global protests and boycotts against the company’s cars.
According to the Tesla Chief, DOGE’s mission was to end the “tyranny of the bureaucracy”, save taxpayers’ money and reduce US national debt, which stands at $36tn (£28.9tn).
DOGE’s activities have included shuttering government agencies, defunding programs and mass layoffs.
President Trump insists Doge representatives have identified “fraud and abuse” inside various departments but has not provided evidence to support his claim. Over two million government employees have received “buyout” deals to leave.
Musk said his team had “saved taxpayers over $1bn in crazy DEI [diversity, equity and inclusion] contracts” Initially Musk said he hoped to save as much as $2tn a year but later halved this pledge.
David Ditch, a senior analyst at the Economic Policy Innovation Center, a conservative think tank, insists Doge’s work is necessary:
“They’re shining a very bright spotlight on various parts of the federal government and they’re asking – whether it’s the American public, whether it’s moderate members of the Republican caucus – is this how you want America’s tax dollars to be used?”
Many analysts however are cautious about whether DOGE can deliver on its goals and Tesla shareholders have been feeling the burn as share prices plummeted most of the year.
In the face of the company’s declining sales and profits, Musk made several statements regarding the company’s future and expressed optimism about Tesla’s long-term prospects, particularly with autonomous vehicles and robotics. He believes that demand for Tesla vehicles remains strong despite the current challenges. He blamed any drop in sales to overall economic weakness and consumer uncertainty. “Absent from macros issues, we don’t see any reduction in demand,” he said.
He did however also acknowledge some challenges and unexpected bumps along the way and after a grim Q1 earnings report, Musk publicly stated that he would be spending more of his time at Tesla and would cut back his work with the government to one or two days per week.
“The large slog of work necessary to get the DOGE team in place and working with the government to get the financial house in order is mostly done,” Musk said in a conference call with Wall Street analysts in late April.
In his conference call Musk defended his work with DOGE, saying that his efforts were aimed at fighting fraud and waste and getting “the country back on the right track”. “If the ship of America goes down, we all go down with it, including Tesla and everyone else,” he added.
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