Tesla stock soared in the months after the November presidential election because investors were convinced Donald Trump was about to do massive favors for his largest financial backer, Tesla CEO Elon Musk. But Trump can also do great damage to Musk’s many business interests. The risk of that damage is one reason that Tesla shares (TSLA) tumbled 14% in trading Thursday following the very nasty and public spat between Trump and Musk. But it’s not just Tesla that could be at risk. SpaceX depends on government contracts for a significant share of its revenue. And Tesla, SpaceX and Musk’s other companies, including social media platform X, artificial intelligence company xAI and brain-computer interface company Neuralink all face regulation from the federal government. In addition, Musk faces possible investigations of his own activities from agencies such as the Securities and Exchange Commission, which is looking into whether he violated rules when purchased his initial stake in X, then called Twitter, ahead of launching his takeover bid for the company. Trump appeared to threaten that he would take such action against Musk, as he posted on his Truth social media platform Thursday that, “The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts. I was always surprised that Biden didn’t do it!” To which Musk replied on his social media platform X: “This just gets better and better,” followed by two laughing face emojis, along with “Go ahead, make my day.” Tesla has relatively few government contracts. But there are numerous federal policies that directly affect its finances, including a $7,500 tax credit for electric vehicle buyers that allows Tesla and other automakers to raise prices. That was likely worth billions to Tesla last year alone. In addition, Tesla reported more than $8 billion in sales over six years of regulatory credits to other automakers to help them comply with federal and state emission standards. Trump is in favor of rolling back those standards and stripping states of the power to set their own emissions rules, which would destroy the market for those credit sales. A note from JPMorgan to clients Thursday estimates the loss of the EV tax credit could cost Tesla $1.2 billion a year and the loss of regulatory credit sales another $2 billion. Musk has also pegged the future of the growth of Tesla on operating a self-driving taxi service without any driver on board. Tesla’s current “full self driving” offering (FSD) requires a driver to be present to take control of the car. The service is due to debut in Austin, Texas, later this month. He admits his ambitious growth plans could be constrained by regulations. In addition, the federal National Highway Traffic Safety Administration has also already announced investigations into accidents involving existing Tesla cars operating with FSD. Many Tesla fans assumed those investigations would be dropped under a Tesla-friendly Trump administration. SpaceX has received $15.2 billion in contracts from NASA, as well as $5.8 billion from the Department of Defense, along with a few million more from other agencies, according to USASpending.gov. Replacing SpaceX on those contracts, however, is not realistic. That’s because there is no other company available to replace it. For example, Boeing, the only other company able transport astronauts to and from the International Space Station (ISS), had problems on its only crewed flight last year. That required its Starliner spacecraft to return to Earth without two astronauts, who were stranded at the ISS for nine months instead of the planned trip of a handful of days. But SpaceX also is subject to the oversight of both NASA and the FAA. Its Starlink satellite internet communication service is also seeking approval from the FCC to expand its service.
How much damage could Donald Trump do to Elon Musk?
TruthLens AI Suggested Headline:
"Potential Impacts of Trump-Musk Feud on Tesla and SpaceX Business Interests"
CNN
8.1
TruthLens AI Summary
Following the November presidential election, Tesla's stock experienced a significant surge as investors anticipated favorable policies from then-President Donald Trump for the company's CEO, Elon Musk. However, the recent public feud between Trump and Musk has raised concerns about the potential negative impacts on Musk's various business ventures, including Tesla and SpaceX. The latter relies heavily on government contracts, which constitute a substantial portion of its revenue. The fallout from this spat led to a 14% drop in Tesla shares, highlighting the vulnerability of Musk's enterprises to shifts in political favor. Furthermore, Musk's companies, which encompass social media platform X, artificial intelligence firm xAI, and Neuralink, face increasing scrutiny and regulatory challenges from federal agencies, including the Securities and Exchange Commission, which is investigating Musk's past activities related to his acquisition of X.
Trump's recent remarks on social media suggested a willingness to eliminate government subsidies and contracts for Musk, which could have dire financial consequences for Tesla. The company benefits from a $7,500 tax credit for electric vehicle buyers and has generated over $8 billion in sales from regulatory credits, which could be jeopardized if Trump follows through on his threats. Analysts at JPMorgan estimate that the loss of the EV tax credit alone could cost Tesla $1.2 billion annually, alongside an additional $2 billion from regulatory credit sales. Musk's ambitious plans for a driverless taxi service could also face hurdles due to regulatory constraints, particularly as the National Highway Traffic Safety Administration investigates existing Tesla vehicles. While SpaceX has secured substantial contracts from NASA and the Department of Defense, it too is not immune to the whims of federal oversight, which could complicate its operations and future growth. The interplay between Trump’s political maneuvers and Musk’s business interests underscores the precarious position of high-profile companies reliant on government support and regulation.
TruthLens AI Analysis
The article explores the dynamic and contentious relationship between Donald Trump and Elon Musk, particularly focusing on the potential financial repercussions for Musk's businesses, including Tesla and SpaceX. The tension has arisen amid public exchanges that hint at Trump’s capability to impact Musk’s financial interests through political means.
Implications of Political Influence
The discussion highlights the delicate balance between government influence and corporate interests, especially in sectors like electric vehicles and aerospace that are heavily reliant on government contracts and policies. Trump’s statements suggest a willingness to leverage political power to influence Musk's financial standing, which could lead to instability in Tesla's stock and other ventures.
Market Reactions and Investor Sentiment
The article notes a significant drop in Tesla’s stock following the public spat, indicating that investor sentiment is closely tied to the political landscape. This reaction underscores the broader implications of political discourse on market performance, particularly for companies that rely on government subsidies and contracts.
Regulatory Risks for Musk’s Ventures
Musk’s businesses are under scrutiny from various regulatory bodies, which adds another layer of complexity to the situation. The mention of potential investigations by the Securities and Exchange Commission indicates that Musk is not only navigating external pressures from Trump but also internal challenges regarding compliance and governance.
Public Perception and Media Framing
The framing of the relationship between Trump and Musk may shape public perception, presenting Musk as a figure who could be easily threatened by political machinations. This could influence how stakeholders view Musk’s ventures and their sustainability in the face of political volatility.
Potential Economic and Political Scenarios
The ongoing conflict could lead to various scenarios, including heightened scrutiny on Musk’s businesses or shifts in investor confidence. The possibility of legislative changes affecting electric vehicle subsidies could also impact the broader market, particularly for other automakers reliant on similar incentives.
Target Audience and Community Reaction
The article seems aimed at a readership that is invested in the intersections of technology, politics, and finance. It appeals to those who are concerned about the implications of political actions on innovation and the economy.
Impact on Stock Markets
Given the significant influence of Trump and Musk in their respective domains, the article raises questions about the potential ripple effects on stock markets. Companies like Tesla are highlighted as particularly vulnerable to political shifts, which could affect investor strategies and market dynamics.
Global Power Dynamics and Current Relevance
The discussion touches on broader themes of power dynamics, especially in the context of influential figures like Trump and Musk. The relevance of this conflict resonates with current global political climates, where business leaders and politicians increasingly intersect.
Assessing the reliability of the article, it presents a balanced view of the potential risks involved without overtly sensationalizing the situation. The focus on factual elements, such as stock performance and regulatory scrutiny, lends credibility to the narrative. However, the framing may influence reader interpretation, suggesting a need for critical engagement with the content.