Tesla shares jumped more than 5% Monday after a Bloomberg News report that President-elect Donald Trump’s transition team was considering federal regulations for autonomous vehicles. The news follows Trump’s appointment of Tesla CEO Elon Musk to lead his new administration’s government efficiency team as co-leader. Trump’s team is already in talks with transportation policy makers to create a unified federal regulatory framework for autonomous vehicles, according to Bloomberg sources.

Musk has criticized the existing state-by-state approval process for autonomous vehicles and sees it as fitting well with the issue of road safety, he says. Tesla’s futuristic two-seat robo-taxi “Cybercab,” without a steering wheel or pedals, announced in May and scheduled for production in 2026, arrived less than two weeks after Musk’s comments.

Mamta Valechha, an analyst at Quilter Cheviot, said a streamlined federal regulatory framework could accelerate the testing and deployment of Tesla’s fully autonomous driving (FSD). But Valechha said regulatory hurdles aren’t the biggest hurdle for Tesla. For more than four years, the company has been developing its FSD software – which has not yet been removed and is still under the driver’s control.

U.S. auto safety regulators are investigating Tesla’s FSD after incidents including reported crashes involving four vehicles equipped with the company’s software. In 2023, one of these accidents was fatal, a factor that has raised concerns about the safety and readiness of the technology for large-scale use.

Tesla shares have gained nearly 28% since November 5, propelling the company above the $1 trillion valuation mark. While there are plenty of reasons for debate, investors appear to be hoping that Musk’s proximity to the White House could help facilitate regulatory changes favorable to self-driving technology.

However, with these gains, the stock’s rise has pushed its price-to-earnings ratio well beyond traditional automakers like Ford and General Motors and even tech giants like Apple and Nvidia. Analysts caution that while federal regulations could provide clarity, Tesla’s FSD technology and safety record remain critical factors for its future success.

The potential regulatory change represents a significant milestone for the autonomous vehicle industry, signaling increased interest from the federal government in shaping the future of autonomous driving technology.