Elon Musk’s ascension as a top adviser to President-elect Donald Trump gives him tremendous power to sculpt the new administration’s approach to electric vehicles — and is sparking renewed scrutiny of his motives.
Trump’s announcement Tuesday that the Tesla CEO and pharmaceutical entrepreneur Vivek Ramaswamy would run a new “Department of Government Efficiency” not only gives Musk opportunity to tip the Trump administration one way or another on key federal supports that affect all automakers but influence decisions that give Tesla — the nation’s largest EV-maker — a potential leg up on its competitors.
“‘The problem is when [new policies from DOGE are] being done by someone like Elon Musk, it puts a pall on it,” said Alan Baum, an independent Detroit auto analyst. “The result may be positive, but the rationale behind it is questionable, which puts a cast on the result.”
Along with benefiting from government contracts through his companies like SpaceX, Musk — via Tesla — is a leading recipient of federal funds to build EV chargers.
His government-efficiency role will have him probing his overseers at agencies as diverse as the Federal Aviation Administration, the Defense Department and the Food and Drug Administration. Meanwhile, Musk could have a role in creating national artificial intelligence policy that affects his AI company, xAI.
Musk also could influence spending at the National Highway Transportation Safety Administration, which is investigating Tesla for failures of its of autonomous-driving technology.
The mandate of the efficiency commission, according to Trump’s announcement, is to “dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies.”
On the campaign trail, Trump vowed to eliminate EPA tailpipe regulations that would effectively force large-scale adoption of EVs and criticized the Biden administration’s $7,500 tax credit for people to buy EVs.
“I don’t think there is any question that the government support of electric vehicles will be drastically reduced,” said Karl Brauer, a longtime auto analyst who works for auto sales site iSeeCars.com.
“If Elon is standing there jumping up and down saying, ‘We need to sell EVs,’ he’s going to be alone in the administration,” he added.
Musk has indicated, however, that an unassisted EV market with curtailed government subsidies could benefit Tesla, by weakening its competitors. In the “long term, it probably actually helps,” he said on a Tesla earnings call in July about the prospect of overturning incentives in the 2022 Inflation Reduction Act.
One sign of Musk’s new influence over the trajectory of EVs was apparent Wednesday. Auto consulting firms contacted for this story, who have spoken freely in the past about Musk and his role as Tesla’s CEO, all declined to be interviewed after Trump’s announcement.
“We can’t speculate on the situation at this time,” one analyst said by email.
A Trump transition spokeswoman, Karoline Leavitt, said in a statement, “Elon Musk is a once in a generation business leader and our federal bureaucracy will certainly benefit from his ideas and efficiency.”
A request for comment from Tesla generated no reply.
Conflicts of interest
It is unclear exactly how the so-called Department of Government Efficiency will operate in the Trump administration. Though Trump on Tuesday described it as “’the Manhattan Project’ of our time,” there is little information on what Musk and Ramaswamy’s budget, staff, or executive authority might look like. A new federal department can only be created by an act of Congress.
”He and Vivek are like a board of advisers,” said Loren McDonald, a lead analyst at EV-data firm Paren. “Ultimately, they have no role in the government.”
It is also unclear if Musk or Ramaswamy will be subject to any rules forbidding conflicts of interest.
Musk deserves the benefit of the doubt as he embarks on an effort to trim trillions of dollars in government waste, Brauer said.
“I don’t see him thinking, ‘I’m going to get a short-term win here by persuading the government to make a short-term move that benefits me,” said Brauer, who praised Musk as “a very long-term thinker.”
“I think they will want to do the undeniably right thing,” he added.
But with Musk’s wide-ranging portfolio that touches so many parts of the economy and a new role that spans so much of government, second-guessing will be inevitable.
How government subsidies help Tesla
One irony of Musk overseeing a department aiming to reduce the government’s footprint is that Tesla has benefited greatly from federal help.
In 2010, during the Obama administration, Tesla got a $465 million loan from the Department of Energy’s loan office. It was a crucial validation for the young automaker and bankrolled the build-out of its first factory in Fremont, California.
“I would like to thank the Department of Energy and the members of Congress and their staffs that worked hard to create the [loan] program, and particularly the American taxpayer from whom these funds originate,” Musk said in a statement in 2013, after the loan was repaid fully ahead of schedule. “I hope we did you proud.”
Recently, Tesla has been a leading recipient of money from the Biden administration’s effort to build a federal highway EV-charging network. As of earlier this year, the company’s network of Supercharger stations received more than $17 million in grants from the 2021 bipartisan infrastructure law. At the time, Tesla installed more charging plazas than any other company with the law’s funding, according to public records.
In his new role, Musk could be in disagreement with the Trump administration if it tries to revoke California’s waiver from the EPA to create its own emissions rules.
Those California rules are a lucrative source of government support for Tesla, but eliminating them may be a priority for Lee Zeldin, the former New York congressman who is Trump’s pick to run EPA.
The California Air Resources Board incentivizes automakers to make EVs by issuing a limited number of zero-emissions vehicle credits. Tesla, which makes only zero-emissions vehicles, sells its credits to other automakers who don’t meet their targets. Last quarter alone, those credits earned Tesla $739 million.
If the Trump administration revokes California’s ability to regulate auto emissions, that portion of Tesla’s income will vanish.
Watch this credit
The policy where Musk could perhaps have the most influence — and potentially benefit Tesla— is the $7,500 consumer EV tax credit, which is one of the most high-profile parts of the IRA.
The credit matters not just because of its visibility to car buyers but because its structure underpins the Biden administration strategy to compete with China on EVs and batteries. To receive the credit, an automaker must make its battery cells domestically and also source large amounts of its raw materials from the U.S. or its trade allies.
In August, at the same time Trump first suggested elevating Musk to a role in his administration, he told Reuters in an interview that he might end the tax credit. “Tax credits and tax incentives are not generally a very good thing,” he said.
On the Tesla earnings call in July, Musk pondered the effect that such a termination would have. “I think it would be devastating for our competitors and for Tesla slightly,” he said.
Analysts agreed with Musk’s assessment. The end of that tax credit would likely cause EV sales to crater — which would cause great damage to automakers that sell less EVs than Tesla.
“When there’s a massive contraction, it’s the marginal players who suffer most,” Brauer said.
Traditional automakers are not as far along on their electrification journey as Tesla and need the tax credit for their investments to pencil out. Eliminating the credit could cause those companies to slow-walk their EV investments and instead rely for income on their traditional, polluting vehicles — while Tesla and China continue to pull ahead.
If the consumer tax credit goes away, “the legacy automakers are going to fall further behind than they already are,” McDonald said. ‘In the end, it all benefits Musk and Tesla and hurts the [rest of the] U.S. auto industry.”
