Why Tesla Stock jumped sharply on Tuesday

What happened

Actions of You’re here (NASDAQ: TSLA) pulled higher on Tuesday, up 4.5% as of 11 a.m. EST.

The gain in the growth stock is likely due both to a bullish day in the market as a whole and to the news that the Trump administration is officially starting the transition process for President-elect Joe Biden. A Democratic Biden administration is widely seen as a net benefit for green energy companies like Tesla.

So what

Under the Obama administration, eligible buyers of Tesla vehicles received significant tax credits. These tax credits were an effort by the administration to help the United States make the transition to green energy faster. But the Trump administration was largely against those credits, and they were phased out for Tesla under Trump’s leadership.

Some Tesla investors may hope that a Biden administration will re-energize green energy incentives, helping to accelerate demand for Tesla’s electric cars, solar panels and energy storage products.

Now what

Investors should not rely on an incentive to stimulate demand for Tesla’s products, as there is no guarantee that Tesla customers will receive further incentives. Additionally, to justify the company’s $ 500 billion market capitalization, the electric car maker will need more than a short-term boost from tax credits – the company must demonstrate a strong organic growth in demand.

Fortunately, demand for Tesla vehicles has performed well since the phasing out of federal tax credits. Vehicle deliveries in the company’s last quarter, for example, were up 44% year on year.