Filenews 11 November 2024 - by Brad Templeton
Elon Musk positioned himself in favour of Donald Trump and "came out" to him. The billionaire provided more than €100 million in funding. dollars the Republican candidate's presidential campaign and is reportedly proposed as the head of a new "Department of Government Effectiveness" in the Trump administration.
Post-election, Tesla stock rallied 18%, raising the value of Musk's fortune to more than $30 billion. dollars and enhancing the value of his participation in SpaceX.
Musk's "bet" on Trump wasn't exactly gambling. As the owner of social media platform X (formerly Twitter), Musk is one of the few people who had full access to a huge database (10 years) of more than 100 million people's activity. U.S. residents on social media. With more (and better) data than pollsters, he could get an accurate estimate of the election result months in advance. As he posted to X, without admitting that he had analyzed the data: "This trend (ed: pro-Trump) has been obvious for months."
Tesla will probably no longer be afraid of the government. The automaker is currently under investigation by the Department of Transportation's NHTSA division into the safety of its electric vehicles. Something that may change with the new transport minister. Every government agency will be very careful with the person who can reduce its budget by 50%. This treaty creates a strong conflict of interest, and so far we have no strong indications that this conflict will de-escalate.
Musk has repeatedly said that Tesla will deliver "fully autonomous driving vehicles" very soon, and that the only uncertainty about that growth is government regulation. This uncertainty now seems to be significantly eliminated. (On a technological level, however, Tesla is still far from ready.)
Tesla is leveraging the subsidies for electric vehicles to which it is entitled, but Musk, unlike other electric vehicle makers, has been willing to go ahead with the projects without the subsidies. Tesla continued to grow, even though its $7,500 tax credit for electric vehicles expired for it, while other makers still benefited from the tax incentive. Without this discount, the price of Tesla will rise, but competitors will suffer more damage. Musk could advocate a less consistent application of regulation.
Tesla built its electric vehicle charging network mostly without receiving subsidies, unlike other companies' chargers that were funded on a large scale. Not only was Tesla's network built for much less money, but it's recognized by most as the best by far. The new €5 billion electric vehicle charging network subsidy scheme It would also boost Tesla, but Musk may want not to be saddled with that financial aid, and other tax incentives that are expected to be included in the inflation reduction bill.
What's more, about half of SpaceX's revenue comes from deals with government agencies, most notably NASA. SpaceX wins contracts for being the best company in the aerospace sector. But it will become even harder to compete with if its CEO will be the head of the unit that oversees government effectiveness and a special adviser to the U.S. president. Blue Origin filed a lawsuit (which it lost), alleging that SpaceX engaged in unfair competition tactics.
The fact that Musk was involved in political commitments made during this election campaign may also have negative consequences for a company like Tesla. As the 2024 polls were one of the most polarized electoral battles in U.S. history, Musk — through his actions — created friends and foes for Tesla. What does this mean for the automotive industry?
Rarely do business leaders get so involved in politics precisely because of polarization. They may attract some customers, but at the same time they lose others. Businessman Trump has benefited from his political followers, but he has also been harmed by his opponents. Silvio Berlusconi had successfully combined television network ownership with his political career. Mitt Romney's Bain Capital didn't seem particularly affected, nor did Ross Perot's EDS, though the two weren't so deeply polarized.
Musk's involvement in politics has slashed Tesla's sales, but we still don't know to what extent. About 25 percent of U.S. adults voted for Harris, but no one knows what percentage of those consumers will boycott Tesla cars. Twitter's losses in ad revenue — due to Elon Musk — were clearer. If 10% of Harris voters boycott Tesla cars, we would be talking about 2.5% of the population, a loss easily offset by the benefits mentioned above.
On the other hand, Tesla's sales are higher in the "blue" states won by the Democrats than the "red" ones by the Republicans, Of course Musk wants to increase the automaker's sales everywhere. Trump has signalled he opposes electric vehicles and policies to combat climate change, but his new adviser will dissuade him.
Musk's activities in China are under threat if Trump declares a "trade war" on China. Beijing in turn may put pressure on Tesla to force Musk to change Trump's mind.
Tesla is facing an unusual problem. Musk believes the company's future lies in autonomous driving and robottaxis. The robottaxi service, however, is overwhelmingly in urban centers. Trump's support in the U.S. province is far greater than in cities, a force that is moving in the wrong direction for Musk's interests. If voters who didn't vote for Trump become anti-Tesla, who and how many city dwellers will be customers of the auto industry? On the other hand, how would Tesla's competition with a politically neutral company in providing robotaxi services evolve into an urban center? Buying a car is a big decision. Consumers are reluctant to choose a car they don't like for political reasons. The transition from one robotaxi company to another (if there is competition) is easier. Even Uber was not affected by dissatisfaction with its practices expressed by left-leaning customers.
In the next midterm elections, in 2026, control of the House of Representatives and Senate could return to Democrats. Such a development would threaten Musk's presence in politics. The tycoon has made enemies who will eventually return to power. Any benefits may be nullified or blocked in the long run. If he wants to escape the potential backlash against him, Musk may have to... to move to another planet. Of course, he is ready for this eventuality too.
Performance – editing: Michalis Papantonopoulos
