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.
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