How Trump’s Second Term Could Be Bad For EVs, But Great For Tesla | Decoder

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Kara Swisher: Hi, everyone. This is Pivot from New York Magazine and the Vox Media Podcast Network. I'm Kara Swisher. We hope everyone had a great Thanksgiving. We're off for the holiday, but we have an episode of Decoder with Nilay Patel for you about how Trump's second term could be bad for EVs, but good for Tesla. Enjoy, and we'll be back with a new episode next week.

Nilay Patel: Hello and welcome to Decoder. I'm Nilay Patel, editor-in-chief of The Verge, and Decoder is my show about big ideas and other problems. The tagline hits a little different lately, huh? Today we're talking about Elon Musk, Donald Trump, and Tesla. And I have to say, it feels like the first of many episodes about that mix of ideas that we'll be doing over the course of the next four years.

Elon's efforts to get Donald Trump elected president in 2024 will go down in history as the ultimate money in politics story. Elon dumped hundreds of millions of dollars into the race, used his PlatformX to relentlessly promote Trump, and promised to run a government efficiency commission that will radically reshape how America operates if any of his ideas actually get put into action.

Since the election, Musk has been deep in the mix planning Trump's second term. He's reportedly spending time at Mar-a-Lago, weighing in on cabinet appointments, and even hopping on the phone with world leaders like Ukrainian President Vladimir Zelensky. He also attended Trump's first post-election meeting with House Republicans in D.C. this week.

Then, on Tuesday, Trump announced that Elon would co-lead the new Department of Government Efficiency with former Republican presidential candidate Vivek Ramaswamy. Yes, the acronym is DOGE. Yes, the Efficiency Initiative has redundant leadership. And to be clear, it's not even a real department or government agency. Only Congress can create those. But it looks like Elon's ambitions to, quote, dismantle federal bureaucracy with severe budget cuts and layoffs have landed him a real advisory job in a direct line to Trump.

But there's one big problem looming over all of this. Elon's money comes from Tesla, and in particular, Tesla's enormously overvalued stock price. Tesla is already the leading seller of EVs in America, but to keep things going, Elon has to sell more electric cars and then also deliver on the promise of those cars becoming self-driving robo-taxis.

The problem is that Trump turned EVs and the EV transition into a political nightmare during the election, not to mention climate change overall, which Trump has resolutely denied. So how is the CEO of an electric car company and an outspoken advocate for combating climate change going to square his support for Trump and a Republican policy agenda centered on climate change denial?

Can Musk convince Trump to pump the brakes on gutting climate regulations in the EV transition? Or is he just looking to spare Tesla as best he can and give it an edge over the competition.

To help figure this all out, I invited Verge Transportation editor Andy Hawkins on the show to help make sense of what could happen next.

Andy Hawkins: This could not be a more critical moment for the auto industry, which has been trying to transition to EVs and taking in billions of dollars in incentives and funding from the Biden administration to speed up the process. The Trump administration dead set on slowing EV adoption would be a disaster not just for Tesla, but every other U.S. automaker. Throw in Trump's controversial tariff plans and, well, you have a political and economic mess of unprecedented proportions, one that could reshape the auto industry and really every other industry in America for years to come.

Nilay Patel: Like I said, I think we're going to be talking about Elon Musk, Donald Trump, and Tesla quite a lot on this show in the years to come. Here we go.

It seems very obvious that the results of the election, Donald Trump being the president once again, will have cataclysmic effects on the auto industry. Whether you think the cataclysm is good or bad very much depends on whether you are personally Elon Musk. So let's just start there. Let's set the stage.

Elon worked very hard to get Trump elected. He was giving away money in Pennsylvania. Trump won. Elon is at Mar-a-Lago on phone calls with Zelensky, vetting candidates for various government positions. What are we expecting Elon to do here?

Andy Hawkins: I don't think it's an overstatement to say that Elon Musk was a pivotal figure in this election. He made a huge bet on Trump's re-election. He spent over $119 million to get him elected. It seemed like in the waning days, Trump was really just outsourcing his ground game to Musk in states like Pennsylvania, and Musk stands to benefit from this victory.

So it's not an exaggeration that Musk has got his hands on the levers of power, and he is very much driving these decisions for this future administration.

Nilay Patel: Elon wasn't always a Trump supporter. He wasn't even always a conservative, he claims. He says that he voted for Obama and Clinton, and it sounds like he voted for Biden in 2020, although who knows? He has often said he wishes he could just have a normal person as president, which is remarkable considering that he is now sitting next to Donald Trump at Mar-a-Lago. How did he get here?

Andy Hawkins: Elon Musk's definition of normal is very different from probably yours and mine. He chafed at the COVID lockdown restrictions. It was very clear that he thought that the reaction to COVID was an overreaction. He was forcing his own workers and Tesla to return to the factory, return to the office, get back to work while much of the rest of the country and the world was at home and not doing those things. That was, I think, as it was for many people in this space, it was kind of a radicalizing moment for him.

But then after Biden was elected in 2020, there was this event that Biden held at the White House where he was sort of wanted to highlight electric vehicles as being sort of like a very key aspect of his climate agenda that he was going to push forward. And he invited all these automakers to the White House to sort of talk about electric vehicles. And notably absent from that list of folks was Elon Musk and Tesla. Musk claimed that he wasn't invited. It's clear that his feelings were hurt by that, obviously, because in many ways, the EV market in the US at that point, and still to this day in a lot of ways, is Tesla. Most of the vehicles that are electric in this country are Tesla vehicles. I think he saw that as a really huge snub, and it kind of turned him against Biden and also subsequently the Democrats, and then kind of just went from there.

Nilay Patel: Do we know why Biden didn't invite Tesla to that event? The only explanation I've ever heard that makes any sense is that it was for union automakers, and Tesla isn't a union automaker. Is that just that simple?

Andy Hawkins: I think it really is kind of that simple that Biden really wanted to start out on a pro-union foot in his administration. And Tesla is notoriously anti-union. UAW has tried to organize at the company for many years and has failed. Obviously, they have deep ties with Ford and with GM and with Stellantis. And Tesla is kind of the outlier amongst US-made automakers as being the one that is non-union.

You can also kind of look at his Twitter behavior, how that has progressed, how he has gone sort of deeper and deeper into far right-wing politics, into conspiracies. And then with the Twitter, eventually with the Twitter purchase, turning it into X, I think things were sort of already on the path that they were, but it obviously accelerated after that.

He's won, right? His man's in office, Trump is gonna be the president. What does Elon want out of the Trump presidency? God, it's like hard to know where to begin with that. I mean, there's obviously a lot of things that he wants just from the federal government, regardless of who is in office. And I saw a lot of really interesting takes prior to the election that regardless of whoever won, whether it was Trump or Kamala Harris, that Elon was going to win no matter what, because of the ways in which his various companies are entwined with the government.

SpaceX is the biggest example of that. The Department of Defense is SpaceX's largest customer. There's billions and billions of dollars that the federal government pays to that company for the launching of various satellites through rocket developments, through all of the sort of space exploration that NASA is engaged in, very much relies on SpaceX. And I think you can see that as Boeing is sort of on the decline in many ways and is having a lot of trouble around many issues involving its planes but also its space business that SpaceX has ascended and is capturing a lot of market share from that company.

So Elon is clearly hoping to maintain this relationship, this beneficial relationship, but also to grow it and to see more taxpayer money funneled into his companies. This makes sense to me when it comes to SpaceX. SpaceX is a defense contractor. We live in America where in 2024, an unelected defense contractor is sitting next to the president-elect talking to the president of Ukraine. Like, OK, I get it. Like, as a young punk rocker, this is how I thought it worked anyway, right? In the 80s and 90s. Fine. The defense contractors are running the country. That's the military-industrial complex. I get it. I don't like it. I don't feel like I have to like it, but it feels familiar. There's something cozy and Reagan-y about that. There's a foundation there that you can build on.

I don't understand what Elon expects Tesla to get out of this. And Tesla is still most of his wealth, right? Tesla's stock goes up after the election, which doesn't really make a lot of sense given its valuation and what that valuation is based on. And Elon's net worth goes up. And then he has leverage to go to a bunch of other stuff. But it's unclear to me why the Trump administration is going to be good for Tesla when Donald Trump has so relentlessly politicized EVs overall.

Andy Hawkins: I think it's a little bit more complex when you start talking about Tesla because, yes, obviously Trump turned EVs into a major talking point throughout the election that he was using to hit Biden and then Kamala Harris afterwards. And I think it's clear he's going to stick to these positions that he says that he was going to take as soon as he was elected. He's going to try to get rid of what he calls the EV mandate. Now, that can mean a lot of different things that were passed under the Biden administration. But it seems like for all intents and purposes, he wants to make it harder or more expensive to buy an electric vehicle in the United States under his presidency, which, yes, would directly affect Tesla, would directly affect the revenue that that company brings in.

And I think you're going to see in the next weeks and months ahead, probably EV sales spike considerably because a lot of people are going to assume these incentives are going to go away and that people who are sitting on the fence and maybe considering an EV purchase, this might help push them towards that decision so that they can get some of these incentives before they go away. And I think Musk has said this before. I think he sees some benefit in what he wants Tesla to become, not maybe what Tesla is now, but what he thinks that it's going to transform into in the future, an AI company, a robotics company, an autonomous vehicle company. And he sees Trump's election as being beneficial to that vision of Tesla.

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Nilay Patel: We're back with Verge Transportation Editor Andy Hawkins discussing how Tesla investors reacted to Trump's presidential win and why Wall Street seems so convinced Elon Musk will spare Tesla from whatever damage the incoming administration might do to the EV transition.

Immediately after the election, Tesla's stock price jumped a lot. Trump gets elected, Tesla's stock price jumps. Tesla's stock price is very much based on Elon's promises, not on deliveries of cars. So Tesla's market cap is vastly higher than GM or Ford, but like an order of magnitude, right? After the election, it added so much value. Now it's basically worth the combined next 10 automakers on the list. So it added an entire Toyota's worth of value after this election. So that's crazy, right? Toyota's business is they take steel and they turn it into cars and they ship the cars. And that is a very physical business. Tesla's market cap is a software market cap, right? It's we're going to use software to turn cars into robo taxis and they're going to drive themselves and that will lead into AI and then we'll have optimist robots. And all that is dependent on the amount of AI software development that no one can see the end of. Nothing about Donald Trump being the president increases the pace of that development. Right. You still need to hire engineers. They still need to do the work. The low resolution cameras in a Tesla still need to be able to accomplish full self-driving, which there's just a lot of doubt and controversy about.

Do you think the market is just rewarding the wrong things that now Elon will be able to do it? Do you think that Tesla has been constrained by regulatory shackles and now they're just going to turn on full self-driving because there will be no one to arrest them? I mean, it certainly seems the case that there will be less scrutiny on Elon Musk's business. One of the defining aspects of the Biden administration is there have been a number of investigations. I think at least 20 investigations into his various businesses, whether it's misleading claims about the autonomy that his vehicles are currently able to achieve or whether or not that the people who are using the cars as they are today are safe. There have been a number of recalls involving full self-driving and autopilot under the National Highway Traffic Safety Administration. I think it's fair to assume that under a Trump administration, all that scrutiny essentially goes away. And if Tesla can be more aggressive in how it rolls out, maybe what's considered to be some half-baked technology that's not based on the sort of the right software and hardware stack that other companies seem to think is necessary in order to roll this technology out safely. If he can sort of assume that he can do this cheaply and with less scrutiny, there's no reason to assume that Tesla can't maybe leapfrog over some of the other companies in this space and achieve more success.

Now, at what expense? You know, that's our lives, obviously, people who drive into these cars and who have to walk around and operate around the other cars. But that's sort of a long-term consideration and maybe not so much a short-term one. But there's also the question of who is he going to sell the cars to? Right now, he's still got to sell cars to fund almost everything. And EVs have been incredibly politicized. The last time you were in a coder, the title of the episode was called Woke Batteries because we had made we'd made EVs woke. Like the Trump campaign tried very hard to insist that Kamala Harris was going to force you to buy an EV, that Pete Buttigieg was going to come to your house and take your pickup truck away. And Republicans don't want to buy EVs. They think there's a mandate. And then right next to that, because of Trump's victory, Teslas have now become politicized. The target market for a Tesla, the liberal buyer who wants to avoid climate change, is not going to buy a Tesla anymore. You can see that being reflected in the market. Sales are down. How is that going to play out for this company? I don't have a crystal ball. I can't really say for certain as to any of this, but I think it still is unclear as to how Trump is necessarily going to unwind the various things that Biden did.

Andy Hawkins: What Trump is going to essentially do when he comes into office is he's going to vandalize things, right? He's going to vandalize the federal government. He's going to chop out a bunch of regulations that he doesn't like. He's going to fire a bunch of people, and he's going to change things to his own liking. Now, that said, I think it's extremely hard to take away something that people have grown to like and expect. And I think that he saw that in his first administration with the Affordable Care Act and how difficult it was for them to repeal Obamacare. It may be the case this time around that they run into the same problem with the Inflation Reduction Act and the federal incentives tax credits and also manufacturing credits that exist to incentivize the purchase of electric vehicles. That may be a real tough sell for him especially if he has to get it through a very narrowly divided Congress, right? There's going to be a lot of Republicans in the Senate and the House who have benefited a lot from the investments that were made under the IRA. There are factories that are being built up across the Sun Belt in places like Georgia and Kentucky, both swing and red-leaning states. And I think it's going to take a lot to convince the elected officials from those places that this is something that's worth getting rid of. Now, that said, the EPA regulations, he has a lot more sway over. He could just essentially cancel or roll back the tailpipe emission rules that Biden put in place that would essentially guarantee that around 50 percent or more vehicles sold by the year 2032 would be electric. He did that before when he rolled back Obama's emission standards in his first administration. I think it's more likely that that's going to be something that's going to be a sort of a first order business under his administration. But the IRA stuff and the tax credits and incentives, less clear that that's going to be a successful position for him to take on.

Climate change feels like a big piece of this. Trump doesn't believe in it. But Elon Musk believes in climate change. He has said he believes in climate change. He started Tesla because he was a climate advocate. He has disagreed with Trump on climate change, or at least on the chronological scale of change. So there's some disagreement inside the House on climate change. Is that going to be effective here? I think a lot of people are assuming that Elon Musk pushing for EVs will somehow change the Trump administration's climate approach. Clearly, the people who have a vested interest in Tesla's success are certainly hoping that Musk can push Trump, can help convince him if he has his ear. And clearly, Trump is enamored with Musk. He thinks of him as a genius. And we've seen from the past that these types of relationships tend to sour in the Trump world. But that said, initially, things are going great between the two of them. And it is certainly possible that Musk can bring Trump over to a less climate antagonistic position. That said, we have to sort of take Trump at his word. He's pulled the United States out of the Paris Agreement under his first administration. He seems poised to do it again the second time. And that was one of the things that sort of drove a wedge between Musk and Trump the first time around was when he pulled the U.S. out of the Paris Agreement. Musk left some of the advisory panels, I believe, that Trump had set up amongst business leaders. So that was a moment in which they drifted apart. So whether or not Musk can be influential in keeping Trump focused on certain things that he wants to have done and maybe steer him away from the more damaging aspects that could threaten the climate and sort of like the position that the United States holds towards climate change in the future, it's going to be really tough for him. Because while Musk is sort of a recent convert to the MAGA world, there is a lot more folks that also have Trump's ear from the oil and gas industry that have been funneling millions and millions of dollars into his various political campaigns. So Musk is certainly going to have a lot of competition in that respect.

The other piece of this that seems very challenging, just from a Tesla has to make and sell cars perspective, is China. China is a huge market for Tesla. They need to be competitive there. The Chinese automakers are investing heavily in EVs. The CEO of Ford just said that he's been testing out a Xiaomi EV and he wishes he could keep it because it's so good. That's a lot. There's a lot there with China. Trump's signature economic policy is tariffs, which feels like if you impose 60% tariffs on Chinese imports, maybe we don't have an auto industry because we don't make a lot of the core components here in the United States. And it will take a long time to ramp up that manufacturing if that's even possible. How do you think Elon manages all of that?

Andy Hawkins: I think one of the perhaps undercovered aspects of Tesla is how vertically integrated the company is, but also how American-made their cars are. Tesla obviously has a growing and crucial business in China. The vehicles that it makes here in America, regularly win the top spots in these annual rankings about who has the most American-made car. Looking at not only where the car is built and assembled, but all the parts that it uses and the local employment and all these other things. And that's because the company relies on a lot of US-made parts, but also because electric vehicles as a whole are just a lot more simple to make than gas-powered vehicles. There's just fewer components. It's just sort of a more simplified manufacturing process. But that said, there's no such thing as a 100% American car. Even Tesla's parts are sourced from all over the place. And if Trump does put these tariffs into place, I think that that is going to have negative effects for Tesla, but also I think more acutely for the rest of the American auto industry. One of the reasons Tesla is successful in this country is there are huge tariffs on Chinese EVs right now, Chinese cars right now, they are not really available for sale in this country because they're not cost competitive in any way, shape, or form. Tariffs would also make, I don't know, BMWs more expensive. It would make GM cars manufactured in Mexico more expensive, potentially. Is this all just a net benefit to Tesla because it's set up to win in this market? That's a pretty smart assumption to make. That said, I mean, it's very clear that the incoming Trump administration is a sort of net negative for the auto industry, especially the EV investment as a whole. I think I saw recently that global data cut its outlook for EV market share in the U.S. by 2030. They previously said that it was going to be about 33% sales, and now they're saying that it's going to be 28%. It doesn't seem like a huge shift right off the bat, but the fact that this is before Trump has even come in and started enacting any of these policies is a pretty clear sign that people are expecting there to be fewer EVs sold overall as his administration takes hold. Auto makers were already rolling back a lot of their investments, but I think that Tesla is probably positioned to withstand these sort of market forces initially much better than a lot of its competitors. Its company is more at scale. It's more mature in terms of its EV business because that is the sole business that it's in. Whereas the rest of these companies, they're still tooling up these factories. They're making deals with battery manufacturers. There's still sort of a lot of balls up in the air for these competitors. And I think that's sort of the combination of a less EV-friendly federal policy, plus the tariffs is really going to just throw the whole thing into chaos.

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Nilay Patel: We're back with Verge Transportation Editor Andy Hawkins discussing how the Trump administration might benefit or hurt Tesla and other American automakers. Before the break, I asked Andy about Trump's controversial tariff plan and how it could slap even higher import fees on foreign-made cars. EV makers like BYD and Xiaomi basically can't sell their products in the U.S. right now due to existing tariffs. But those tariffs could soon cause problems for domestic manufacturers like GM, which build some cars in Mexico. So I wanted to know, what's the landscape in the auto industry right now? And who's going to be able to weather the storm if and when Trump's higher tariffs do arrive?

Let's start with the legacy automakers. There wasn't really the outpouring of congratulations from GM and Ford and Stellantis and VW and whatever that we saw from the tech industry. Right? Tim Cook and Mark Zuckerberg and Sundar Pichai falling over themselves, Jeff Bezos ever wants to congratulate Trump immediately. I think they worried about tariffs. They worried about AI regulation. They can see some opportunity for themselves. Legacy automakers? They just watch their big competitor drive this guy to the White House. Are they worried? Are they afraid? I mean, they still sell gas cars. If you Ford, maybe F sales are going to skyrocket. Are they looking at this as an opportunity? Are they worried? What the vibe?

Andy Hawkins: There's probably some concern about how some of these bets that they've been making over the last year are going to evolve. But that said, I think what Trump represents that in terms of federal policy towards emissions, towards incentives and subsidies, I think the legacy automakers are pretty well positioned to handle. And they've already sort of been making a lot of decisions in the run up to the election to kind of push out the EV targets that they originally were making when things were looking a lot more bullish back in 2021 and 2022. Now we're already starting to see they're not convinced that EVs are going to be as dominant a force as they already were because of the slowdown in sales, the infrastructure, sort of the bungled infrastructure rollout of charging, and the fact that customers were just not flocking to the vehicles, especially those sort of like in the middle of the market because of the lack of availability of affordable options. So I think that in some respects, while China really kind of cracked the code on cheap EVs and was able to sort of transform its entire industry, it's still kind of a slower pace here in America. And I know that there's a lot of people out there who are sort of pushing the argument the U.S. is going to be left behind in this technological revolution, that EVs are not as fragile as you might think. They are the future of the industry and that the U.S. does not want to be sort of left in the dust is a pretty strong argument to make. It's clear that despite who is in office and who's running things, that GM and Ford and Stellantis are still betting on electrification as a future. I think it's just they've already convinced themselves that it's going to take a lot longer than they originally thought. And now with Trump, it's possible that it's going to be even longer than they thought previously.

Then there's the startups, right? The pure players, the Rivians, Lucid. There's a bunch of companies that are doing well, and then basically Rivian. That's how I look at that category of companies. Rivian is still not profitable. It has a long way to go, but it's on a curve. All the other companies are kind of struggling in various ways. Are they going to survive? Can you pull this out if you're a Rivian and you don't have tax subsidies? You don't have an American government that wants there to be another strong player in this market. What do they have to do?

An interesting thing that happened, I think just like only about two weeks before the election was this defunct SUV brand called Scout Motors revealed its first two vehicles. And now they are currently owned by Volkswagen, but they were sort of one of the pioneers of like trucks and SUVs back in the 60s and 70s. And they've been revived by Volkswagen and now they said they're going to be an EV brand. And that was sort of what everyone was operating under the assumption. But then they came out with these cars and they're actually hybrids, which I think surprised a lot of people. I mean, they're not specifically hybrids in the sort of the traditional sense, but they have these gas-powered generators in them or an option to that are sort of considered to be range extenders, right? So that said, I thought that that was a really interesting position for this company to take. And I think you could see some of these smaller players like Rivian, like Lucid, and some others start to be more open-minded about the possibility of hybrid. For a long time, they've said hybrids, there's no point. The future is electric. It's an outdated technology. We don't want to be invested in that. And that could continue to be sort of the line that they stick to for the near term. But I think in the long term, if you're any of these companies that's sort of hanging by a thread, and obviously all of them have rich benefactors in their corner. Rivian has a deal, a $5 billion deal with Volkswagen. Lucid is closely tied to the Saudis and all of the money that they have. But, you know, that's not a guarantee for future success and long-term survivability. So I think if you are looking into the horizon at what is going to be this new future that we have, I think it would be a smart decision by all these companies to start to think more broadly about other technologies, range extending and hybrid, that they should be also invested in. And that really brings us back to the billion-dollar question we started with. What happens next? We're nine weeks from the inauguration. Elon is hanging out at Mar-a-Lago trying to reshape the whole US government any way he wants. What's he going to do? I think there's like a lot of questions. What does Musk want out of all this? I think we've gone over some of those things that he could potentially want. There was obviously talk about him joining the administration and heading up some sort of a new department around government efficiency, where he would just start laying waste to the bureaucracy and trying to cut $2 trillion worth of federal spending. Good luck to you, I would say, in that endeavor. This is a $7 trillion government. If you're going to try to ax over $2 trillion worth of federal spending, that could prove to be devastating, I think, to a lot of the things that people rely on for their daily lives. I don't put a lot of stock in the idea of Musk just flat out joining the Trump administration, because that would require him divesting himself from all of his various companies. And it doesn't seem like that's something that he necessarily likes to do. He has his fingers in many different pots, and I think he likes to keep it that way. So it seems likely that he will continue to be influential in this administration. He could potentially head up some sort of blue ribbon panel or whatever that Trump decides to make. But it doesn't seem likely that he would actually become a cabinet member or some sort of Senate confirmed position. That would be tough for me to imagine. But that said, I think he's going to be pushing his own people on Trump. He's already been recommending several SpaceX executives for senior administration positions. So I think if he can be assured that he has Trump's ear, his own people are in the government carrying out his wishes, and he has some sort of outside position where he can sort of continue to exert his influence, while also still being the richest man in the world and enriching himself through government contracts, through regulatory credits, through all these other things that