Musk’s Role in Trump Administration Raises Concerns for EV Industry

The Trump campaign spent years criticizing the many ways the US government has incentivized EV adaption. So, the recent prominence of Tesla CEO Elon Musk in the plans for next Trump administration sounds like good news for the domestic EV and battery industries: Musk has been the most vocal proponent for electrification that these industries have, so surely his new position close to the president-elect’s ear gives hope that he can mitigate the next administration’s worst anti-electrification plans, right? Not so fast.

Elon Musk’s appointment to President-elect Donald Trump’s incoming administration as co-leader of a “Department of Government Efficiency” has sparked concerns about potential conflicts of interest and the future of U.S. EV policy. The Tesla CEO’s influence could reshape federal regulations, particularly those supporting electric vehicle adoption, while possibly bolstering Tesla’s market position at the expense of its competitors.

Potential impact on EV policy

Trump’s campaign promises to roll back key EV incentives, such as EPA tailpipe regulations and the $7,500 federal EV tax credit, are central to these concerns. Analysts suggest Tesla could weather the loss of subsidies better than traditional automakers, given its advanced electrification efforts and dominant market share. “I don’t think there is any question that the government support of electric vehicles will be drastically reduced,” iSeeCars.com analyst Karl Brauer told Politico.

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Musk himself acknowledged during Tesla’s Q2 earnings call that if the IRA tax credits were removed, Tesla might face some short-term challenges, but that the company was well-positioned to weather such changes. "I think it would be devastating for our competitors, but it would hurt Tesla slightly," Musk said. "Long-term, it probably actually helps Tesla."

President Joe Biden signs HR 5376, the “Inflation Reduction Act of 2022,” Tuesday, August 16, 2022. Official White House Photo by Cameron Smith

The tax credit, a cornerstone of the Inflation Reduction Act, incentivizes domestic battery production and sourcing. Its removal could destabilize US automakers’ EV plans, forcing them to scale back investments while Tesla and international players, including China, continue to gain ground.

Conflict of interest concerns

Musk’s role in overseeing the dismantling of federal bureaucracy also raises questions about conflicts of interest. While his companies, including Tesla and SpaceX, have historically benefited from federal programs, his new position may allow him to influence policies governing EV infrastructure, emissions, and autonomous driving technology—all areas critical to Tesla’s business.

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Observers also note the irony of Musk leading a cost-cutting government body while Tesla remains a significant recipient of federal funds. For instance, Tesla has received $17 million in grants under the 2021 bipartisan infrastructure law for its EV charging network and has earned $739 million last quarter through California’s zero-emission vehicle credit program. In its November 18 morning email, The New York Times notes that Tesla also has at least $352,000 in government contracts through the Departments of State, Defense, and Energy.

Industry reaction and other areas of concern

Some in the auto industry are uneasy about Musk’s new influence. “When there’s a massive contraction, it’s the marginal players who suffer most,” Brauer told Politico. Traditional automakers, which are less advanced in their EV transitions, may struggle if government incentives are reduced, leading to a reliance on polluting vehicles while Tesla and other leaders push ahead.

Concerns also center on the lack of clear conflict-of-interest safeguards for Musk and co-chair Vivek Ramaswamy in their new roles. Without clear rules, policy decisions could be seen as favoring Tesla’s interests. Additionally, the fate of California’s EPA waiver, a critical source of Tesla’s zero-emission vehicle credit revenue, is uncertain. Revoking the waiver could have far-reaching consequences for both Tesla and automakers relying on the state's emissions standards.

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Mr. Musk captured attention in the waning days of the Trump campaign for his vigorous jumping up and down at rallies. His rivals in the US EV and battery industries may want to wait before jumping up and down with him.