How did Trump and Musk get along?

Automotive Business Review Magazine

2024-07-26 10:07Posted on the official account of Beijing Automotive Business Review

Written by Zhang Linyu

Editor / Huang Dalu

Design / Division

来源 / Bloomberg, New York Times

Donald Trump last served as president from 2017 to 2021.

During his tenure, in addition to withdrawing from the Paris Agreement, he also "loosened" the high standards for car fuel consumption and carbon emissions during the previous Barack Obama administration.

At that time, Obama's standard was to achieve fuel consumption of about 4.32 liters per 100 kilometers by 2025, requiring United States car companies to improve the fuel economy of cars in stages.

Trump believes that this fuel consumption standard will make United States car companies increase technology investment, resulting in an increase in car prices, and the average price of each new car will increase by $2,340, and he believes that United States people will not be able to afford cars.

In March 2020, the Trump administration finally scrapped fuel economy standards, requiring only 1.5 percent annual increases until 2026, well below the 5 percent annual increase set by the Obama administration. In addition, federal law prohibits California from enacting stricter tailpipe emission standards and zero-emission regulations for motor vehicles.

In addition to reducing the burden on car companies, in the view of the Trump administration, the relaxation of fuel consumption standards will also stimulate oil consumption in United States, which can reach 500,000 barrels per day by the 30s of this century.

At that time, his policies did not please all car companies, and GM and Ford both stood up against his "reversing" in California.

This time, Trump is back to run for the next president of the post-Biden era. He formally accepted the Republican nomination at the Republican National Convention on July 18, 2024 local time in United States, and in his speech, he vowed to scrap the electric vehicle policy on his first day of office if re-elected to save the "going ruin" of the United States auto industry.

As he did seven years ago, Trump still opposes a new set of emissions standards for light and medium-duty vehicles manufactured in 2027 and beyond, passed under the Biden administration. He sees the planet's warming by burning oil, gas and coal as a "green new hoax." He sees the transition to electric vehicles as a "jobs killer," claiming to benefit China at the expense of United States auto workers.

He said that if he wins the presidential election in November, he will end Biden's electric vehicle mandate and impose 100 percent tariffs on electric vehicle imports from Mexico. Mr. Trump also welcomed Chinese companies building factories in United States, on the condition that they hire United States workers.

This can't help but make people wonder why Elon Musk, who advocates accelerating the energy transition, is still openly walking so closely with Trump under conditions that seem to be unfavorable to him?

Musk's interests

Biden passed the Inflation Reduction Act in August 2022, which provides a tax credit of up to $7,500 for NEV buyers, but the bill has specific requirements for the model, which must be a vehicle manufactured by a qualified United States manufacturer. Some of the models sold by Tesla in the United States that year did not fully meet the requirements of the bill.

Tesla doesn't actually receive much of the tax deductions in the bill, instead earning a decent amount of revenue from the sale of carbon credits.

Therefore, even if Trump cancels the subsidy policy for terminals in the "Inflation Reduction Act", it will have little impact on Tesla's sales, but Ford and GM will be greatly affected.

In addition, Trump is likely to impose a 10% tax on imported auto parts, which means that the cost of an average car will increase by about $1,500. But the policy won't have much impact on Tesla, as 65 percent of its parts come from United States and Canada, while United States auto industry, the use of local parts is much lower than that, at 45 percent. It does increase costs for other car companies.

Electric vehicles involve huge fixed costs and require large-scale sales to spread the costs. Once Trump takes office, changes in his policies cause the industry to shrink, and Tesla's competitors will face tougher challenges, while Musk will have an easier time coping.

If the Trump administration relaxes emissions regulations, GM, Ford and other automakers may switch to gasoline-powered vehicles. GM and Ford have said they are launching electric vehicles to offset regulatory pressure on gasoline-powered vehicles.

If they reduce production of the Chevrolet Blazer or F-150 Lightning, Tesla will benefit and its market share will continue to grow. Sales in the second quarter of 2024 show that Tesla's market share in the United States has fallen below 50%.

Analysts say Tesla has a huge lead in production and already has a network of charging stations, and even without subsidies, Tesla may be more likely to remain profitable than traditional automakers like General Motors or Ford.

Currently, Tesla's free cash flow is expected to fall 62% to $1.7 billion this year, according to Visible Alpha. Musk needs the money because he wants to take Tesla from the vanguard of the electric car revolution to a self-driving taxi and humanoid robot on the bet.

In Musk's plan, the moon landing program is the focus, and the greening of transportation in United States is actually not so important.

In addition, during the Biden administration, it seems to value GM and Ford more, which Musk has publicly expressed dissatisfaction. He believes that as the absolute leader of pure electric intelligence, he has not received the attention of the government.

Trump persuaded by Musk?

Speaking at an arena rally in Grand Rapids, Michigan, on July 20, 2024, Trump's attitude toward all-electric vehicles appears to have changed, saying, "I've been talking about electric vehicles, but I'm not against them, and I'm totally for them." After a while, he added, "I've driven electric cars, and they're great, but not for everyone." ”

The subtle change is said to be related to Musk, who met in Palm Beach, Florida, in March. According to Musk's statement at the shareholder meeting in June, the two began to discuss a range of topics frequently, including electric vehicles, in Palm Beach. "He's going to call me out of the blue," Musk said, "I don't know why, but that's what he did." ”

Since then, Trump's attack has shifted from the reliability and value of electric vehicles to the federal government's policies to encourage consumers to buy electric vehicles, as well as environmental regulations designed to encourage automakers to increase production. Anyone who wants to buy an electric car should be able to afford it, he said, and the government should not dictate the car market.

At Tesla's shareholder meeting in June this year, according to recordings at the time, when asked about Trump's apparent shift, Musk replied: "I can convince others." "A lot of his friends have Teslas now, and they love it," Musk said. "He's also a huge fan of CyberTruck. These may have been the reasons for his conversion. ”

Musk was a sharp critic of Trump. During Trump's presidency, he resigned from two advisory boards over Trump's decision to withdraw from the Paris climate agreement, but Musk backed him back in the White House within half an hour of the July 13, 2024, assassination of Trump.

"Elon supported me the other day," Trump said at a rally in Grand Rapids, Michigan, adding that Musk had pledged to donate $45 million a month to his campaign. "Not $45 million, but $45 million a month!" He said.

Partisan divisions

The 2024 election could change the course of electric vehicles and the clean energy transition in United States.

Judging by past positions, Trump believes that climate change is a hoax and that he wants to expand oil and gas drilling. At the same time, Biden sees climate change as an urgent threat and wants United States to move away from fossil fuels and switch to clean energy.

In response to the Biden administration's policies, United States automakers have invested billions of dollars to build EV production capacity.

Electric vehicles accounted for 6.8 percent of new car sales in United States in May, according to Edmunds, a car testing and automotive market tracker. In the global market, United States car companies are facing fierce competition from Chinese car companies. BYD has received a large subsidy from the Chinese government, and its cars have a high market share in China and are starting to be sold in Europe.

Mi·ke Murphy, a veteran Republican adviser to promote electric vehicles, said, "Any auto CEO will tell you that electric vehicles are going to save the auto industry so that Chinese don't dominate the auto industry." But in Trump's view, his investment in electric vehicles is consistent with Biden's policies, so it's wrong and must be combated. ”

When it comes to electric vehicles, public opinion is clearly partisan. A Pew Research Center survey in June showed that 77 percent of Republicans said they would not consider buying an electric car as their next car, with only 13 percent saying they were "very interested" in an electric car, while 45 percent of Democrats said they were "very interested" in turning their next car into an electric car.

"Trump is playing on what Republicans really believe," said Whit Ayres, a Republican political adviser·. "They're unlikely to consider buying an electric car, and they really hate the idea that the government will subsidize Democrats who want to buy an electric car."

Trump insisted that the United States auto market will never be fully electrified. "You can't electrify all cars, we can't electrify cities," he told the crowd in Michigan. ”

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