By endorsing Trump, Elon Musk is betting on the future of Tesla

30 minutes after the assassination attempt on former President Donald Trump, Elon Musk did what he had previously promised not to do.

“I fully support President Trump and hope for his speedy recovery,” the billionaire posted on X. This promise is enough to remain on the sidelines.

But it did not stop there. Days later, Wall Street Journal reported that Musk planned to donate vast sums of his own wealth to a super PAC supporting Trump, possibly more than $45 million a month. (Musk later disputed the report, calling it “FAKE GNUS.”)

Whether he plans to flood the election with money or not, Musk’s MAGA awakening is probably pretty confusing for his fan base. After all, Musk staked his legacy on shifting the world to renewable energy and Trump is widely seen as an accelerator of climate change.

Trump also poses a unique threat to Tesla, which is the source of most of Musk’s wealth. He said in no uncertain terms that if elected, he would reverse all of the Biden administration’s investments in infrastructure and electric vehicle charging incentives. And he has made electric vehicles a line of attack in his campaign, calling them expensive, overweight and impractical.

“I have no objection to the electric vehicle, the EV,” Trump said in a recent interview with Bloomberg. “I think it’s great. Elon is fantastic. I think it’s great. I’ve driven them many times and they are wonderful. But you can’t have 100% of your cars electric. We cannot electrify our cities.”

And at the Republican National Convention in Milwaukee, Trump said he would end the “EV mandate” on “day one” of his administration. This could also include new automotive standards aimed at reducing greenhouse gas emissions and encouraging more sales of electric vehicles.

If Trump wins and manages to reverse President Joe Biden’s Inflation Reduction Act, the impact will be felt on Tesla’s vehicle sales. Today, anyone who buys a new Tesla Model 3 or Model Y can likely get up to $7,500 off the purchase price at the point of sale, thanks to Biden’s EV tax credit. Meanwhile, used Teslas qualify for a $4,000 tax credit. The incentives bring the price of the new rear-wheel-drive Model 3 to under $30,000 – even lower when you apply state credits.

It’s no secret that Tesla’s sales have been weak this year. Increasing competition forced the company to reduce prices, hurting its once-vaunted profit margins. And Musk’s online antics have further eroded the brand’s reputation. Tesla sales fell 6.3% in the second quarter of 2024, even as total EV sales rose 7.3%, according to Kelley Blue Book.

Now Musk risks bleeding even more by throwing his support behind Trump, who will undoubtedly do everything in his power to eliminate EV spending if elected. House Republicans have already fired several straight shots, voting in favor of several proposals that would roll back the IRA or eliminate the electric vehicle tax credit. Trump would be happy to sign any of these bills if given the opportunity.

Of course, if Tesla’s tax credits disappear, so will everyone else. One could argue that the traditional auto industry is more dependent on government largesse than Tesla, which has a huge advantage in producing electric vehicles, has multiple factories operating around the world, and has already built a reliable network of stations. charging electric vehicles. Without the credits, the Model 3 would likely still be one of the most affordable options, while EVs from other automakers would suddenly become more expensive. And its efforts to introduce more accessible models are still years away from fruition.

Musk has criticized tax credits in the past, arguing that the industry should support itself with government handouts. He also said the government should not fund electric vehicle charging stations. “Take away the subsidies,” he said on X earlier this week. “This will only help Tesla.”

But you don’t have to look far back to see the limits of this point of view. Tesla got its start thanks to a $475 million loan from the Department of Energy at a critical time in the company’s history. Several experts have noted that Tesla likely would not have survived, nor become the global powerhouse it is today, without the federal loan. Musk’s other companies also rely heavily on government contracts, including SpaceX and his Internet business Starlink.

Musk clearly has a cordial relationship with Trump; the two apparently talk a lot on the phone. And despite investing billions of dollars in developing electric vehicles, the Biden administration has always kept Musk and Tesla at arm’s length, snubbing them at White House events and omitting their names in press announcements. Musk criticized Biden as having “not the friendliest” administration in 2021.

The Biden administration has also taken a closer look at Tesla’s autonomous driving technology, opening investigations that could result in securities and wire fraud charges. Musk likely hopes to nip these investigations in the bud by supporting Trump’s bid for the White House.

If successful, one can imagine some short-term successes for Tesla. EV tax credits were canceled, as was any investigation into the company’s autonomous driving claims. Corporate taxes are reduced, business regulations fall by the wayside, and Tesla is less burdened with allegations of labor abuse or racial and gender discrimination. Meanwhile, Musk’s pet causes, like immigration enforcement and gender conformity, become the law of the land.

But there is much more to lose, including Tesla’s stated goal of accelerating “the world’s transition to sustainable energy,” as it states on its website. A Trump victory would be extremely bad for the planet and the renewable energy sector. The former president has long been critical of solar and wind energy. And the Republican Party is a great ally of the oil and gas industry. These are not forces that will lead to a cleaner, more sustainable planet. Quite the opposite.

Musk once said he would never get involved in politics and that when he does, he usually has to hold his nose. Maybe he should have taken his own advice and stayed out of this race.