Tesla faces new hurdles due to Musk’s conflict with Trump
The contentious rift between Elon Musk and United States President Donald Trump may have significant financial implications for Tesla. While he remains persona non grata within the Trump administration, Musk, the chief executive of Tesla, will face challenges in convincing Republicans to refrain from dismantling climate policies that hold significant financial value for the electric car and battery sector. Musk may also experience a decline in influence over federal regulators, who possess the power to significantly impact his ambitions to implement driverless taxis, which he has characterized as the company’s future.
Tesla is currently experiencing significant reductions in both sales and profit margins. The company’s share price experienced a significant decline of 14 percent on Thursday, marking its largest one-day drop, following a series of insults exchanged between Musk and Trump on social media platforms. The stock experienced a partial recovery on Friday, increasing by nearly 4 percent, potentially driven by optimism regarding a possible truce or the perception among investors that the stock had become undervalued.
A persistent divergence existed between Musk and his Republican counterparts regarding electric vehicles. The domestic policy bill approved by House Republicans and currently under Senate review is poised to negatively impact the electric vehicle market in the United States, where Tesla stands as the predominant manufacturer by a significant margin. The proposed legislation aims to abolish tax credits that can reach as high as $7,500 for individuals purchasing electric vehicles. The proposal would promptly eliminate subsidies for battery manufacturing facilities and lithium processing plants, as well as terminate financial assistance for electric vehicle charging infrastructure. The legislation additionally establishes an annual charge of $250 for electric vehicle owners.
The implementation of those measures would adversely impact all automotive manufacturers engaged in the sale of electric vehicles. However, the Trump administration is also attempting to eliminate regulations that are particularly advantageous to Tesla, enabling it to sell clean air credits to other companies that do not comply with environmental standards.
In the initial quarter of the year, Tesla generated $595 million from the sale of regulatory credits, surpassing the company’s net profit of $409 million. In essence, absent the credits, Tesla would have reported a financial loss.
“In many years, it’s the difference between being in the black and being in the red for Tesla,” stated Jesse Jenkins, an assistant professor at Princeton University specializing in the EV industry. He has estimated that the Republican measures would lead to a reduction of 7.7 million electric vehicle sales by 2030 compared to the scenario where Biden administration policies continue to be implemented. Republican legislation would also abolish programs that subsidize the expenses associated with large battery storage projects, a sector that has seen significant expansion for Tesla.
New domestic policy, A legislative proposal aims to abolish tax incentives for electric vehicle purchasers while instituting an annual fee of $250. Additionally, it seeks to gradually discontinue subsidies for battery manufacturing facilities and lithium processing plants, as well as terminate financial backing for electric vehicle charging infrastructure. The Trump administration is also attempting to eliminate regulations that are particularly advantageous for Tesla. These regulations enable the company to sell clean air credits to other automakers that do not meet environmental standards.
