Musk's spat with President Trump sparks fresh troubles for Tesla

By Jack Ewing

 

Elon Musk’s bitter falling-out with United States (US) President Donald Trump could be costly for Tesla. 

As long as he is persona non grata in the Trump administration, Musk, the chief executive of Tesla, will struggle to persuade Republicans not to gut climate policies worth billions of dollars to the electric car and battery company. 

Musk may also lose sway over federal regulators who could make or break his plans to deploy driverless taxis, which he has described as the future of the company. 

Tesla is already suffering steep declines in sales and profit. Its share price plummeted 14 per cent on Thursday, its biggest one-day decline, after Musk and Trump began insulting each other on social media. The stock recovered somewhat Friday, rising nearly 4 per cent, perhaps on hopes that the men would reach a truce or because investors thought the stock was now a bargain. 

 

There was always a disconnect between Musk and his Republican allies on electric cars. The domestic policy bill passed by House Republicans and being considered by the Senate will hurt the electric car market in the US, where Tesla is the largest manufacturer by far. 

The bill would eliminate tax credits of up to $7,500 for people who buy electric cars. It would quickly phase out subsidies for battery factories and lithium refineries, and end financial support for electric vehicle (EV) charging stations. The bill also imposes an annual fee of $250 on EV owners. 

Those measures would hurt all carmakers that sell EVs. But the Trump administration is also trying to kill regulations that are especially beneficial to Tesla, which allow it to sell clean air credits to other firms that fail to meet environmental standards.

During the first three months of the year, Tesla sold regulatory credits worth $595 million, which was more than the company’s net profit of $409 million. In other words, without the credits, Tesla would have lost money. 

“In many years, it’s the difference between being in the black and being in the red for Tesla,” said Jesse Jenkins, an assistant professor at Princeton University who studies the EV industry. 

He has calculated that the Republican measures would result in sales of 7.7 million fewer electric vehicles by 2030 than would be the case if the Biden administration policies remained in place. 

Republican legislation would also eliminate programs that subsidise the cost of large battery storage projects, which has been a growth business for Tesla.

 

Turbulent times

-  New domestic policy Bill to eliminate tax credits for people who buy EVs, and impose an annual fee of $250

-  Will also phase out subsidies for battery factories and lithium refineries, and end financial support for EV charging stations

-  Trump admin also trying to kill regulations especially beneficial for Tesla

-  Those rules allow firm to sell clean air credits to other car makers that fail to meet environmental standards

 

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