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No business leader has done more to support former US President Donald Trump’s candidacy than Elon Musk. But the billionaire and his business empire face both positive and negative sides after Trump’s re-election to the presidency.
Musk has so far donated nearly $119 million ($180.97 million) to the political action committee he set up to support Trump, according to Federal Election Commission filings. He has appeared with Trump at rallies and hosted interviews with him on X, his social media platform.
“He made a big bet here. He dived into the deepest part of the pool in this election,” said Daniel Ives, technical analyst at Wedbush Securities.
Early Wednesday, investors were already betting that a Trump victory would also be a victory for Musk’s large public holding company, Tesla ( TSLA ), sending shares of his electric vehicle maker up 13 percent in the open. That boosted the value of the 411 million Tesla shares Musk owns outright by more than US$13 billion ($19.77 billion), better than the 11,000 percent return on the US$119 million ($180.97 million) donated by Trump. But there are risks for Tesla, even with a Trump victory.
Much of Musk’s massive net worth can be found in the government support that his companies, such as Tesla and SpaceX, have received over the years. Even if Vice President Kamala Harris had won, much of that money would have continued to flow. But even if some government support for electric vehicles is now reduced or cut off, as is likely with a Trump victory, Musk’s wealth will remain firmly intact. In fact, Tesla could benefit if government subsidies for electric vehicles end.
What Trump’s victory means for Tesla
Musk posted a number of tweets on his X social media platform late Tuesday and early Wednesday, celebrating Trump’s victory.
“The American people gave @realDonaldTrump a crystal clear mandate for change tonight,” he wrote in one of them.
Trump is openly hostile to electric vehicles, saying they are too expensive, have limited range, and will destroy jobs and the American auto industry. But what might seem like the biggest blow to Tesla since another Trump presidency — reducing, if not eliminating, federal support for electric vehicles — might not be so bad for Tesla and Musk.
But other policies at the center of Trump’s plans could cause major problems.
Trump has promised to end what he calls “Biden’s EV mandate,” although no such mandate exists and it’s unclear what he means.
But under Biden there was significant government support for building and buying electric vehicles, including billions of dollars in loans to encourage automakers to invest in factories to build electric vehicles and batteries in the United States, support for charging stations and a $7,500 tax (11 400 USD). credit to many electric car buyers.
Many experts believe that Trump will end these programs. Trump could order the Treasury Department to change the rules that determine when car buyers qualify for the credit, greatly limiting the availability of the tax credit. Or, if Trump has a Republican-controlled Congress, he could pass legislation that would eliminate all credits.
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But Musk said he’s not worried about the elimination of the tax breaks, as Tesla sees it as a boon to legacy automakers’ efforts to move into the EV market and provide more competition.
“Remove the subsidies. It will only help Tesla,” Musk posted on X in July.
Thanks to increased competition, Tesla’s global sales in the first nine months of this year fell by 2 percent compared to last year. Sales and profits managed to improve in the third quarter, but it was the first time the company had experienced such a decline in its history.
Self-driving vehicle policy could change
Trump is more likely to give the green light to Musk’s yet-to-be-built true self-driving vehicles, Ives said, along with a fleet of so-called “robotaxis” for driving without any driver on board.
Garrett Nelson, an analyst at CFRA Research, agrees.
“In our view, Tesla and CEO Elon Musk may be the biggest winners from the election result, and we believe a Trump victory will help accelerate regulatory approval of the company’s autonomous driving technology,” he said in a note to clients on Wednesday, raising his recommendation on Tesla shares from ” Hold” to “Buy”. He raised his 12-month price target on the stock by $110 to $375 per share.
The company’s existing driver-assistance features, known as Autopilot and Full Self-Driving, or FSD, are facing investigations by federal safety regulators after a series of accidents involving the technology. Those investigations could slow approval to allow truly self-driving Tesla cars on the road, despite Musk’s widely disputed claim that Teslas using FSD are already safer than those driven by humans.
“Under Trump, those investigations could slowly disappear,” Ives said.
Not all government support for electric vehicles will likely disappear under Trump’s next administration. In addition to tax breaks for buyers, much of the taxpayer money spent to support EV adoption comes in the form of government loans to automakers and their suppliers to build factories in southern “red” states. It is unlikely that Trump would want to cut back on that support and the promise of jobs in those states, even if they end up competing with Musk and Tesla.
Traditional automakers say they will continue with their plans to build and sell more electric vehicles in the future. Electric vehicles are said to be the future for the industry, even if the rate of adoption has slowed recently.
“It’s not a strategy where we handicap the presidential election or the next and the next and see what we can get away with with the EPA,” Ford CEO Jim Farley told investors in July. “The only way we believe it’s sustainable is to make money on small electric vehicles. And that’s our bet.”
Automakers are trying to sell more electric vehicles to help companies meet increasingly stringent environmental regulations in the United States, Europe and Asia. Even if Trump forces the EPA to change emissions rules here, automakers will retain an incentive to continue making electric vehicles to meet regulations elsewhere or stricter environmental regulations in many US states, including California, which has its own stricter emissions rules to follow many other countries.
Industry experts say they don’t expect electric vehicle sales growth to stop, even if Trump changes emissions rules, in part because of growing consumer demand.
“We could see a much slower adoption of electric vehicles (with the change in regulations),” said Jeff Schuster, global head of automotive at GlobalData, an industry consultant. “But with all the investment, we’re unlikely to undo it.”
Trump’s China policy could hurt Tesla
The bigger problem for Tesla with a Trump victory is that there could be a renewed trade war with China, Ives said, given the importance of its Shanghai factory to its global sales and profits.
With Trump winning, “he’s going to be much tougher on China, and then the negatives could outweigh the positives for Tesla,” Ives said. “Over 40 percent of deliveries come from the Chinese market. Tesla would be caught in the crossfire.”
And it could also be a problem for Tesla if Trump picks Musk to lead his administration’s efforts to reduce what they call government waste, as the two have mentioned on the campaign trail.
Whatever the outcome of those efforts, and whether Musk has a formal or informal government role in Trump’s new administration, the last thing Tesla investors would want to see is Musk further distracted from his time leading Tesla, Ives said.
“There’s more time away from Tesla at a time when you want more attention on Tesla,” Ives said.
Less impact on SpaceX and X
Musk’s other big business, SpaceX, probably wouldn’t have a significantly different relationship with the federal government regardless of who is elected. Its main competitor, Boeing, is having serious problems with the spacecraft contracted by NASA to transport astronauts to and from the International Space Station.
And Musk’s ownership of X has been widely criticized, particularly by Democrats, for spreading misinformation. But he was not shut down or impeded by government action even under Biden, and the new Trump administration is unlikely to take any action against him. And given the financial losses since his purchase of the company, it’s now a relatively small part of Musk’s total net worth.
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