The ongoing U.S. elections could be a turning point for American electric vehicle firm Tesla and its controversial CEO Elon Musk. The billionaire has thrown his support behind presidential candidate Donald Trump and has reportedly spent more than a million dollars on Trump’s campaign. With Trump reversing his previously antagonistic stance on battery electric vehicles (BEVs) in light of Musk’s endorsement, the assumption is that a second Trump presidency would be beneficial to Tesla.
However, the situation is a lot more complicated than that. A Trump administration would probably do its best to lower federal electric vehicle purchases, a decision that will limit EV market growth and undoubtedly impact the Texas-based EV-maker. Furthermore, Trump has stated in the past that he would increase tariffs on certain European imports, another policy decision that would impact growth in the electric vehicle market.
In the past few weeks, Tesla’s CEO Elon Musk has endorsed Donald Trump, attended several rallies, pumped millions of dollars into the Trump campaign, and even attracted the attention of lawmakers. The result is that Trump has changed many of his public views on electric cars, going against the generally anti-electric car and anti-climate action Republican Party. A 2023 poll found that nearly 71% of Republicans wouldn’t consider purchasing an electric vehicle compared to just 17% of Democrats.
Before Musk threw his weight and considerable finances behind Trump’s third presidential campaign, the former president opposed electrification and denounced the federal government’s use of taxpayer funds to support the nascent EV sector through subsidies and incentives. He also said that he would withdraw as much financial support as he could from the EV sector if elected again.
Although Elon Musk claims to be anti-subsidy, Tesla has received nearly $3 billion in federal and state subsidies via tax credits and grants since it debuted the Tesla Roadster in 2008. Eliminating federal EV subsidies would affect Tesla’s sales, especially among budget-conscious buyers who make up the majority of the EV market. This has already happened in Europe, the second largest EV market on the globe, where electric vehicle sales dropped after EV incentives were removed before the market matured.
Trump’s pledge to remove the U.S. EV mandate to reach 50% electric vehicle sales by 2030 would also damage EV industry growth by causing investor uncertainty, slowing down battery electric vehicle production by established carmakers, and signal to consumers that the transition to electric cars isn’t a priority. Additionally, Trump may choose to increase the Biden administration’s 100% tariff on Chinese EV imports, risking retaliation from China, currently Tesla’s second-largest market.
Other EV firms like ElectraMeccanica Vehicles Corp. Ltd. (NASDAQ: SOLO) are also likely to follow the poll outcome closely since the next administration could play a big role in supporting or holding back the growth of the electric vehicle industry not just in the U.S. but around the world.
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