Musk turns on Trump, triggering steep Tesla declines
President Trump has threatened to end government subsidies and contracts to Elon Musk’s companies, with Tesla facing billions of dollars in annual losses without various state and federal programs. Musk escalated the feud with a series of posts on X, formerly Twitter, attacking the president, erasing $150 billion in Tesla’s market value on Thursday before a Friday rebound. After the market’s close on Friday, Tesla’s market cap stood at about $950 billion, down from roughly $1.1 trillion at the week’s start.
Musk’s specific criticisms of Trump’s bill include the entrepreneur saying: “There is no change to tax incentives for oil & gas, just EV/solar,” according to The Hill. The Tesla CEO also said on X: “Abruptly discontinuing the energy tax incentives would jeopardize America’s energy autonomy and the dependability of our power grid.” On Thursday, President Trump said on his Truth Social platform that the “easiest way to save money in our budget, billions and billions of dollars, is to terminate Elon’s governmental subsidies and contracts,” Reuters reports. The president also posted on Truth Social: “Elon was ‘wearing thin,’ I asked him to leave, I took away his EV Mandate that forced everyone to buy Electric Cars that nobody else wanted (that he knew for months I was going to do!), and he just went CRAZY!”
How Trump’s and Congress’s initiatives impact Tesla
The House of Representatives version of Trump’s bill, passed in late May, proposes to largely end the federal $7,500 tax credit for new electric vehicle (EV) purchases by the end of 2025. If passed by the Senate, eliminating the federal EV subsidy could erase $1.2 billion in Tesla’s annual profits, according to Reuters. Separate Senate legislation that removes California’s EV sales mandates could lower Tesla’s yearly sales by another $2 billion.
Tesla earned almost $2.8 billion last year by selling regulatory credits to other automakers, helping competitors meet government-established car emissions rules, many of which are in California. Since Tesla only makes all-electric vehicles, it earns a surplus of regulatory credits that it can sell to other automakers. Competitors who don’t manufacture enough zero-emission vehicles face steep fines if they don’t purchase regulatory credits from Tesla. Republicans in Congress are working to lower some of the federal waivers California needs for stricter emissions standards than the federal government, and if rolled back, Tesla’s regulatory credit profits would take a significant hit.
Tesla plans to launch its driverless robotaxi rideshare service in Austin, Texas, this month, subject to government oversight. Still, analysts don’t believe Musk’s feud with Trump will impact the autonomous Tesla fleet’s debut. Gene Munster, Tesla investor and managing partner at Deepwater Asset Management, said: “In my view, the White House has little to gain in standing in front of autonomy, given autonomy is central to physical AI, and for the US to be a leader globally in AI, it also needs to be a leader in physical AI,” according to Business Insider. Autoblog contacted Tesla for comment but didn’t receive a response.
Final thoughts
Elon Musk spent over $250 million to help re-elect Donald Trump, with Tesla’s stock increasing after the President’s victory. However, Musk’s controversial time as a special government employee, most notably with the Department of Government Efficiency (DOGE), triggered severe stock declines at Tesla, ultimately causing the entrepreneur to step away from politics and focus more on his company. Musk’s decision to go on the offensive against Trump could further erase any benefits he and Tesla initially gained through their partnership, as reflected in this past week’s stock market. Gene Munster estimated in a Friday report that eliminating EV tax credits could reduce Tesla’s 2025 deliveries by 15%.