Yahoo Finance What Elon Musk should tell Donald Trump
Donald Trump is a petrolhead. The former president gushes over fossil fuels and rails against alternative energy. Trump has pledged to limit or even stop sales of electric vehicles if elected to a second term in this year’s presidential race, as if he can turn the clock back a decade or two.
A possible new Trump adviser — Tesla CEO Elon Musk — could help Trump freshen his thinking. The Wall Street Journal recently reported that the two men have established a sort of alliance, with Musk possibly taking an advisory role in a second Trump administration if Trump wins this year’s presidential race. Musk is a polymath, and the Journal suggested he could offer Trump ideas on border security and data analysis. But Musk could certainly correct some of Trump’s misunderstandings on EVs as well.
Musk and other automaker CEOs might applaud Trump’s deregulatory plans, but none of them is pulling for Trump to kill the EV. Carmakers have already spent billions developing EV technology, with another $1 trillion or so in planned investment through 2030. That’s a massive amount of spending meant to transform and modernize one of the world’s biggest industries.
The pace of EV sales has slowed recently, but that doesn’t mean the technology is a passing fad. EVs are still more expensive than traditional gas-powered models, and range limitations still scare off buyers who don’t live near robust charging networks. EVs are still in their early days, and there are likely to be breakthroughs that lower cost, extend range, and make EVs appealing to a much broader set of drivers.
There’s sinister political logic behind Trump’s crusade against EVs. Trump has reportedly made a bald pitch to fossil fuel executives, asking them to raise $1 billion for his 2024 campaign in exchange for carbon-friendly policies during a second Trump presidency. The assumption is that limiting EV sales will cause Americans to buy more gasoline and benefit fossil fuel drillers, who in theory would sell more product.
But that’s a narrow, America-only view that doesn’t account for what’s happening in the rest of the world. Climate change and global warming are forcing decarbonization everywhere, and the big US companies Trump seeks the favor of don’t just operate in the United States.
Exxon Mobil, Chevron, ConocoPhillips, and the like must orient their businesses toward what’s happening everywhere, not what one particular American president might prefer. Same for all the big automakers. While these corporate giants want to milk as much profit from legacy businesses as they can, they also want to cash in on future opportunities such as carbon capture, EV mineral mining, and whatever fuels vehicles 50 years from now.
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Fossil fuels are going to be around for a long time, but they serve industries of the past. EVs and renewable energy are industries of the future, with fortunes to be made by businesses that make the right bets. They’re among the 10 industries China considers pillars of national strength, worthy of special treatment. And China leads, for now, in the development of affordable EVs.
The mercurial Musk actually supported Biden and his green energy agenda when Biden took office in 2021. But as Biden began to promote EVs, he often excluded Tesla, a non-unionized automaker, instead hyping General Motors and Ford, which are unionized but far behind Tesla in EV technology.
Musk grew irritated, and lately he has become a prominent Biden critic. In an April tweet, he described Biden as “a tragic front for a far left political machine.”
Musk could tell Trump a few things about EVs and green energy. First, while the United States is the biggest market for Tesla’s electric cars, China is second and Europe is third. Overseas markets are crucial to developing the scale needed to get and stay profitable. Trump could change the rules in the United States to favor more gas burning, but other markets would continue to press for greater EV adoption to meet their own pollution and emission targets. It would disadvantage some US firms to establish US standards far out of sync with those elsewhere.
Second, virtually nobody ever bought a Tesla because the government made them do it. Teslas are premium cars buyers pay up for because they want to own one. EVs have appeal beyond their eco-friendliness.
Finally, investors have rewarded Tesla for its leadership role in an industry of the future by bidding the stock sky-high and making Tesla one of the world’s most valuable companies. Tesla has benefited from government subsidies meant to speed the adoption of EVs, but it also did fine when those subsidies expired for Tesla and other automakers hitting certain sales targets. Tesla is a market success, not a government lapdog.
Biden, for his part, has a different angle on the politics of automaking. He signed into law huge incentives for green energy production, with some of them contingent on hiring unionized workers. He sided with striking automakers last year and showed up at a Michigan picket line. Most recently, he imposed a 100% tariff on Chinese-made EVs, which is meant largely to keep them out of the US market completely and protect American jobs.
Both Trump and Biden know they need to win the Rust Belt states of Pennsylvania, Michigan, and Wisconsin to take this year’s presidential prize. The battle over EVs is really a fight for blue-collar votes in battleground states. Someday, however, your EV won’t be a political statement, but just a car.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
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