What the Trump-Musk bromance means for the global EV chessboard
Brandon Bell/Pool via AP
- Trump has been hard on EVs, but a new friendship with Elon Musk could change things.
- So far, Musk supports Trump's plans to dismantle EV tax credits.
- Chinese EVs will likely be the biggest threat to the EV market during Trump's second term.
President-elect Donald Trump took a hard stance against electric vehicles on the campaign trail, but his recent friendship with Tesla CEO Elon Musk has called into question his position on EVs when he takes office in January.
Among Trump's campaign promises is a plan to dismantle the Biden Administration's EV tax credits, which have helped drive down the cost of EVs this year as the vehicles remain frustratingly expensive.
Trump has also promised to pull back on EV sales requirements — which he's falsely referred to as "EV mandates" — implemented with Biden's Inflation Reduction Act.
Musk, now a close ally of President Trump's and nominee for head of a newly formed Department of Government Efficiency, has amassed more influence in Trump's decision-making after the election, calling into question whether he will advocate for or against anti-EV proposals.
Since the election, Musk has been a frequent guest at Trump's Mar-A-Lago estate, and the two have shown public support for each other frequently on social media.
Tesla has long benefited from EV tax credits and fuel economy requirements
The Model 3, one of the most popular EVs in the US, is one of the few EVs that still qualifies for a $7,500 tax credit. Meanwhile, stringent fuel economy requirements have been good for Tesla's credit-sales business, a steady stream of revenue based on Tesla selling its excess fuel economy credits to companies that are not complying with the rules.
Automakers had hoped that Musk would support EV regulations and tax credits, but it appears the CEO is siding with Trump for now. In a post on his social media platform X, formerly Twitter, Musk called to "end all government subsidies, including those for EVs, oil, and gas."
An industry group representing many automakers (but not Tesla) pleaded with Trump to preserve EV tax credits but reconsider some of the more stringent emissions regulations.
Trump wants to keep Chinese cars out of the US
The Alliance for Automotive Innovation also wrote to warn of competition from "heavily subsidized electric vehicles and technologies exported from China."
This existential threat is playing out in Europe, where car companies are hit hard by BYD's entrance. Strict trade policies in the US have so far held at bay this threat.
Trump has said he wants to increase tariffs to keep foreign goods, particularly Chinese cars, out of the US. But it's unclear how this plan can keep the cost of EVs down in the near future — especially with EVs costing some $10,000 more than their gas-powered counterparts.
With no government subsidies to help win over new buyers, car companies will have to discount and lower prices on these already unprofitable cars.
Musk said in May that he is "in favor of no tariffs."
This was an about-face from Musk's stance a few months earlier when he advocated for trade barriers and warned that Chinese EV companies would "demolish" competition without guardrails.
That makes it hard to pin down Musk's exact stance on EV regulations, or how that could ultimately influence Trump. So far, tax credits have helped to boost domestic EV adoption. At the same time, Biden Administration bans on Chinese goods and connected cars have shielded American factories from cheaper overseas competition like BYD or Xioami.
Some experts have seen BYD's entrance into Europe as a canary in the coal mine for US automakers. They say: Don't let them in.
Expanded tariffs on parts or cars from China or any other region are likely to inflate EV prices, and Trump's stated plans to dismantle EV tax credits that ease affordability would erode the segment's progress in reaching more budget-minded shoppers.
This affordability crisis has even dinged Tesla, which has reported rocky sales reports this year as wealthy early adopters drop out of the market.