Elon Musk’s bromance with Donald Trump could cost him billions

When Elon Musk made his “dark gothic MAGA” appearance on stage at Donald Trump’s controversial Madison Square Garden event this week, it may have, indeed should have, caused some Tesla shareholders to wince.

Musk has gone all in with his bromance with Trump, appearing at his campaign events and pumping $US75 million ($114 million) or more of his own money into the campaign.

Elon Musk’s public support of Donald Trump will have ramifications. Credit: AP

His “X” social media platform has tilted heavily towards Trump, with the Wall Street Journal saying that even users of X uninterested in political issues are being fed heavily partisan posts.

At face value, Musk’s decision to throw his weight and funds behind Trump is odd.

Trump has made no secret of his disdain for electric vehicles, having spent years denigrating them and promising to withdraw the tax and carbon credits that play a major role in their take-up. He has said he will end the Biden administration’s EV mandate on “day one” if he wins next week’s election.

While Trump might have softened his tone somewhat since Musk joined his campaign – he now says EVs could make up “a very small slice” of the US auto market – he hasn’t budged from his stance on removing federal government incentives for EVs.

Musk’s Tesla is the biggest EV manufacturer in the US. It benefits from the tax credits of up to $US7500 per vehicle and carbon credits that run into the billions of dollars a year. “Clean air” credits contributed $US739 million of its third quarter revenues – about 30 per cent – when Tesla reported its earnings last week.

Polling has shown that Democrat voters are nearly five times more likely to buy an EV than Republicans. The Democrat stronghold of California is Tesla’s biggest domestic market. Musk’s support for Trump risks not just an increase in the cost of Tesla’s EVs for consumers but alienating his core customer base.

With Tesla reliant on China for about a third of its earnings, Trump’s proposed 60 per cent tariff on China’s exports to the US, which would draw a strong response from China might also have been expected to play on Musk’s mind. China also happens to control most of the supply chain for EV batteries.

Tesla’s big exposures within China make it vulnerable to any government or Chinese consumer backlash in response to a full-on trade war with the US.

Tesla shareholders, who re-approved Musk’s $US56 billion pay package this year after a court had earlier voided it, might be expected to be concerned that he is aligning himself so closely with someone whose policies are so potentially inimical to their company’s interests.

As Musk himself said to Tucker Carlson this month: “If [Trump] loses, I’m f---ed.”

Tesla, already embroiled in disputes and investigations involving a number of US government agencies, couldn’t expect any favours from a Harris administration.

Those disputes with the government aren’t confined to Tesla, which has found itself investigated for making misleading claims to consumers and over a number of fatal crashes of its semi-autonomous vehicles. Other Musk-related companies, notably SpaceX, X and Neuralink, have also had run-ins with a range of agencies, as has Musk.

Musk may believe a Trump administration, with deregulation as a priority, might rid him of those meddlesome agencies. He might also prefer Trump’s tax cuts for companies and the wealthy to Harris’ plan to tax both a lot more.

His shareholders might also be wondering why, given he already oversees six significant companies, he is so enthusiastic about heading up a government efficiency commission if Trump wins.

Trump has embraced Musk’s idea of creating a commission that would identify ways to slash government spending.

Musk has said – he repeated the claim at Madison Square Garden – that he could cut $US2 trillion from the US federal budget.

Given that the US government spent $US6.75 trillion last financial year, that’s an ambitious prediction. With more than $US5 trillion of that related to social welfare, healthcare and veterans benefits programs, and another $US845 billion for defence spending, it is also an improbable one.

While Trump has said he could cut spending by “impounding” funding approved by Congress – refusing to spend the funds – there are legal constraints on his ability to do so. In any event, both major parties would revolt if the flows of approved spending within their electorates were heavily cut.

Just as Musk’s highly visible support for Trump may raise some conflicts with the best interests of his companies and their shareholders, the leading role in the proposed efficiency commission would create far more direct ones.

Musk’s companies are within regulated areas of the US economy and receive massive financial assistance from the US government.

A recent New York Times investigation said that his companies were awarded nearly 100 contracts, worth about $US3 billion, by 17 different federal government agencies this year alone. Tesla and SpaceX had been awarded contracts totalling at least $US15.4 billion over the past decade, the Times said.

Tesla’s big exposures within China make it vulnerable to any government or Chinese consumer backlash.Credit: AP

Putting Musk in charge of a body tasked with carving into federal spending while his companies are beneficiaries of massive amounts of government funds and he, personally and in his corporate roles, has been engaged in numerous disputes with federal agencies, would create endless conflicts of interest.

SpaceX, for instance, has railed against a requirement to obtain permits to discharge potentially contaminated water from its launch site in Texas.

It has also clashed with the Federal Communications Commission, which regulates the satellites it launches, after the FCC withdrew nearly $US900 million of proposed federal funding for SpaceX’s Starlink business that would have delivered internet access to rural areas.

Musk has said SpaceX’s ambition of sending humans to Mars could be achieved sooner if it wasn’t “smothered by bureaucracy”. He’s no fan of regulation.

In the case of Tesla, its EVs are only semi-autonomous, with drivers having to keep their hands on the steering wheel at all times. Competitors like Google’s Waymo already have fleets of driverless cars operating within US cities.

Musk has said he expected to have fully autonomous vehicles available sometime next year, but after a series of crashes involving Tesla vehicles including a recent fatality, the US National Highway Traffic Safety Administration is investigating whether Tesla’s Full Self-Driving technology is defective.

With fully autonomous, driverless robotaxis the key to Tesla’s future and its current $US833 billion market capitalisation, tearing up regulation and slashing the budgets of agencies that supervise and regulate his businesses could be transformative and lucrative.

If Harris were to win, however, his campaigning for Trump and his proposed assault on federal government spending might well create an even more intrusive and costly regulatory environment for Musk and his companies.

As Musk suggested so colourfully, if Trump loses, he probably does too, along with the companies he’s so closely associated with.

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