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In Trump Presidency, Elon Musk and Tesla May Lose Big

In Trump Presidency, Elon Musk and Tesla May Lose Big

By Brian Fung, The Washington Post | Updated: 10 November 2016 10:23 IST

The Republican Party's sweeping victory at the polls Tuesday may deal a difficult blow to one of America's most closely watched companies: Tesla, the electric car maker that's trying to revolutionize the auto industry.

Some of the biggest implications for Tesla may come in the form of new US energy policies that favor traditional fuel sources such as oil and coal, said Kathryn Thomson, a former top lawyer for the Federal Aviation Administration and the Department of Transportation.

"Anybody who advocates for energy-efficient, sustainable solutions should be worried," said Thomson. "On the one hand, Trump is saying, 'Let's look at all the options,' and that's positive. On the other hand, he seems to be pushing more-conventional fuels and technologies. And that's not good for innovation, and that's not good for efficiency and sustainability."

Tesla didn't immediately respond to a request for comment.

Trump has signaled that he will roll back regulations on fossil fuels, approve the Keystone XL oil pipeline, and boost the coal industry. In May he said that his energy platform would not "pick winners and losers." By default, analysts say, this is likely to benefit oil and gas companies that have dominated the energy sector for decades, whereas without government assistance, newer entrants such as Tesla will face an uphill battle.

Trump's administration would be "clearly in favor of enhanced exploration and production of oil and gas as a tenet of energy, economic and national security policy," Scott Segal, co-head of government relations at the legal and lobbying firm Bracewell, told the Washington Post.

Adoption of electric cars could also be affected by the expiration of tax credits associated with the technology. Under the current rules, consumers can claim up to a $7,500 credit for buying an electric car, so long as the manufacturer that produced it has not reached a federally mandated cutoff. This knocks the price of a Tesla Model 3 from $35,000 to $27,500.

The future of these tax credits may come into question based on Trump's opposition to the government picking winners and losers; once all the credits have been handed out, it would require government action to continue the program.

"Traditionally, Republicans have been less supportive of policies that promote one technology over another, so there could be some austerity measures that could threaten alternative fuel incentives," said John Eichberger, executive director of the Fuels Institute.

That, in turn, could drive up the price of electric vehicles. Developing a low-cost electric car that mainstream consumers can afford has been a principal goal of Tesla's from its earliest days.

"Our long term plan is to build a wide range of models, including affordably priced family cars," wrote Tesla chief executive Elon Musk in a strategy blueprint in 2006. He added that Tesla would attempt to drive down the price "as fast as possible." The tax credits' looming expiration casts a shadow on that approach.

Still, other analysts say that the current pace of innovation in electric vehicle technology will be enough to overcome those hurdles.

"The industry, as a whole, is too far down the path of addressing what consumers want and need from EVs, with brands such as Tesla, GM and Nissan leading the way," said Tony Lim, an analyst at Kelley Blue Book.

Tesla shares opened down nearly 3 percent Wednesday.

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Further reading: Tesla, Elon Musk, Donald Trump, US Election

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In Trump Presidency, Elon Musk and Tesla May Lose Big

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