Why Is Elon Musk Actually Embracing Donald Trump?

On Wednesday, throughout a gathering at Mar-a-Lago attended by a few of Donald Trump’s closest associates, a speaker demanded, “The place is the George Soros of the precise?” In a scene that an attendee captured on video, Elon Musk, the fifty-three-year-old South African-born billionaire who reportedly spent a couple of hundred and thirty million {dollars} to support Trump’s marketing campaign and help different Republicans in aggressive races, raised his arm. Amid loud cheers, the speaker declared, “God bless you, Elon. We’re so, so grateful.”

Musk has claimed publicly that he has by no means requested Trump for any favors, and that Trump has not supplied him any. Regardless of spreading misinformation on X, his social-media platform, and closely financing the marketing campaign of somebody who plotted an autogolpe, he has additionally denied being a political extremist. After the Mar-a-Lago video surfaced, Musk wrote on X that he was the “ ‘George Soros’ of the center.” In different phrases, he has portrayed himself as somebody who entered the political area to make the world a greater place.

On Wall Road, there’s a extra self-serving clarification for Musk’s bear hug of Trump. “It’s a poker transfer for the ages,” Dan Ives, an analyst at Wedbush Securities who has lengthy been bullish on Tesla’s inventory, advised CNBC. If that’s true, the play has already paid off massive time. Between Trump’s victory on November fifth and the shut of buying and selling on Friday, Tesla’s inventory value went from $251.50 to $320.72. In response to Tesla’s filings with the Securities and Change Fee, Musk owns about 715 million shares, so primarily based on that determine the worth of his stake has risen by nearly fifty billion {dollars}. This huge sum dwarfs the hundreds of thousands he spent on Trump’s behalf, and even the forty-four billion {dollars} that he and a bunch of buyers paid for Twitter in 2022, an acquisition that tremendously elevated his potential to affect the political course of. Soros, throughout his profession as a Wall Road speculator, had some massive scores, however none of them had been anyplace close to as monumental as Musk’s post-election good points.

The run-up in Tesla’s inventory displays buyers’ conviction that the insurance policies of a second Trump Administration might be favorable to the carmaker. However the presence of Trump within the White Home may even have necessary implications for Musk’s different corporations, lots of that are topic to oversight by federal businesses such because the Federal Commerce Fee and the Federal Communications Fee, or which have massive contracts with authorities departments.

For instance, SpaceX, Musk’s progressive rocket firm, has obtained almost twenty billion {dollars} in federal contracts since 2008. It’s now a serious supplier of launches to the Worldwide House Station, and, in 2022, it surpassed Boeing as NASA’s second most utilized contractor. SpaceX already stands to obtain billions extra within the coming years, however a brand new NASA mission to Mars, say, may open the federal spigot even wider. Trump hasn’t stated a lot about that concept publicly, however Musk posted, a few weeks in the past, “Vote for @realDonaldTrump if you would like humanity to make it to Mars!”

Trump’s dedication to construct up the U.S. House Power that he created in 2019 may ship extra federal {dollars} within the path of SpaceX. In October, the House Power awarded a $733.6 million contract to Musk’s firm for area launches. If Trump expands its price range, extra contracts may properly consequence. Elsewhere, Musk’s satellite tv for pc firm, Starlink, which got here to public consideration for its position in offering Web service in Ukraine after Russia’s invasion, may stand to profit from the election. Through the first Trump Administration, the Federal Communications Fee provisionally awarded Starlink almost 9 hundred million {dollars} beneath a program to ship broadband to rural areas, however final December the company cancelled the funding on the grounds that the corporate had failed to satisfy this system’s necessities. Now some Republicans need to restore it.

Tesla is the massive kahuna, nevertheless. On Thursday, its inventory sank on reviews that the Trump transition group is planning to remove the seventy-five-hundred-dollar federal tax credit score for E.V. patrons that the Biden Administration expanded as a part of its green-industrial coverage. If this cancellation stalls additional adoption of E.V.s, it might appear more likely to harm Tesla—however the outlook isn’t so clear. Since Joe Biden got here to workplace, legacy automakers like Ford and Common Motors have invested closely in new E.V.s and E.V. crops, however thus far they haven’t made an enormous dent in Tesla’s market share, which continues to be hovering at round fifty per cent. Musk now appears to be betting that eliminating the credit would immediate different automakers to chop again their growth plans for the E.V. market, and even abandon them completely, which might reinforce Tesla’s dominant place. “I believe it might be devastating for our opponents and for Tesla barely,” he stated throughout a July earnings name. “However, long run, in all probability truly helps Tesla, can be my guess.” On Thursday, Musk responded to the information that Trump was, certainly, transferring towards eliminating the tax credit. “For my part, we must always finish all authorities subsidies, together with these for EVs, oil and fuel,” he wrote on X.

Trying forward, Musk has made clear that he believes Tesla’s future hinges on its autonomous driving system, generally known as Autopilot, which it has been investing closely in for years and urgent regulators to approve for a rollout. Final 12 months, Musk stated that Tesla’s excessive stock-market valuation was “totally on the premise of autonomy.” However his plan to show Tesla right into a producer of driverless autos has run into obstacles. The day-to-day regulation of motor autos takes place on the state stage, and Tesla, which was lengthy primarily based in California, has been making gradual progress with lawmakers in Sacramento. Furthermore, the Nationwide Freeway Site visitors Security Administration (N.H.T.S.A.) has discovered that Tesla’s driver-assisted model of Autopilot contributed to a whole bunch of crashes and greater than a dozen fatalities. The company is now evaluating the effectiveness of a software program replace that Tesla issued final December.

Regardless of the continuing federal investigation, throughout a Tesla earnings name in October, Musk referred to as for a “federal approval course of for autonomous autos,” which might dispense with prolonged state-by-state purposes. He didn’t clarify why such a system would work higher for Tesla, however, provided that Trump’s reëlection was within the offing, maybe no clarification was actually wanted. “There might be a knock on the door for N.H.T.S.A., and it’s Musk,” Ives, the Tesla-stock bull, stated. Ives predicted that switching to a federal system of regulation may pace up approval of driverless automobiles by at the least two or three years. “That is what the inventory is beginning to mirror,” he added.

In one other obvious paradox, Trump’s proposals to impose tariffs of as much as sixty per cent on imports from China, the place Tesla has its largest manufacturing unit, may additionally find yourself serving to the carmaker. The brand new tariffs would reinforce the limitations that hold out low-cost Chinese language E.V.s, which I wrote about earlier this 12 months, and which doubtlessly characterize an existential risk to all American carmakers, Tesla included. However, the tariffs may increase Tesla’s personal prices. Though Tesla doesn’t import the autos it makes in China to the US, it does import a few of the elements of its American-made automobiles, and their costs may rise sharply—until, after all, the second Trump Administration granted it the identical form of carve-out from the brand new tariffs that the primary Trump Administration granted to Apple after a private enchantment by its C.E.O., Tim Prepare dinner. Is Trump more likely to grant Musk such a useful favor? “We’ve got to guard our geniuses. We don’t have that lots of them,” the President-elect remarked on Election Evening.