FT: ‘Elon has finally woken up’: Musk battles to save Tesla from Trump

Key topics:Musk slams Trump’s bill that may erase Tesla’s key emissions credit profitsFeud escalates as Tesla risks billions from lost tax breaks, EV subsidiesMusk’s donations backfire amid GOP support for bill slashing green incentives.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..By Stephen Morris in San Francisco and Alex Rogers in Washington.Elon Musk donated more than $250mn to elect Donald Trump. In return he received a bill that could cost Tesla billions.Trump’s “big, beautiful bill” puts at risk a crucial source of profit for Tesla by neutering rules that allow the electric-vehicle maker to sell billions of dollars of emissions credits.The bill deepens a crisis for the company that is already reeling from plunging sales and the loss of EV tax incentives. The legislation provoked a furious response from Musk.While Trump worked to jam the bill through Congress this week, Musk called it an “abomination” and threatened to target lawmakers who supported it with hostile donations — and even launch his own political party.Trump retorted that “without subsidies, Elon would probably have to close up shop and head back home to South Africa”. Their escalating feud threatens critical parts of Musk’s business empire — and leaves Republican legislators caught in a tussle between the US president and the world’s richest man.“All family fights are ultimately about money,” said San Francisco-based tech entrepreneur Trevor Traina, who served as ambassador to Austria during Trump’s first term.“This one seems to be no different . . . Billions in subsidies versus hundreds of millions in primaries.”In public, Musk has argued against the fiscal bill on the grounds that it will vastly increase the US deficit. But the threat to Tesla is also central to his opposition.Trump has vowed to kill the US’s three parallel systems of emissions credits, in the name of lower car prices — including one scheme run by the Environmental Protection Agency for greenhouse gas emissions and a second in the state of California based on EV and hybrid car sales.His “big, beautiful bill” targets a third system, the federal “corporate average fuel economy” (Cafe) standards. The programme penalises automakers whose vehicles fall short of fuel-efficiency targets and rewards those that produce no emissions with clean air credits, which can then be sold on to gas-focused rivals to offset their fines.Selling credits under Cafe and similar systems in other jurisdictions contributes a substantial and growing proportion of Tesla’s profit.In the first quarter, Tesla’s reliance on the systems was stark: it would have made a loss if not for credit sales, which rose 35 per cent to $595mn, eclipsing Tesla’s overall $409mn of net income.Last year, the company reported $2.8bn in revenue from selling regulatory credits worldwide, up from $1.8bn in 2023, and accounting for 39 per cent of its $7.1bn annual net income. It has made more than $11bn since 2015..Read more:.Elon Musk sticks with Tesla, plans to curb political cash.The budget bill negates the Cafe by setting fines at zero. Tesla worries that traditional automakers will largely stop buying credits as a result, people familiar with the company’s internal debates have said.“If there’s no penalty for cheating, there’s no reason to buy compliance credits,” said Dan Becker, director of the Safe Climate Transport Campaign at the Center for Biological Diversity. “I’m not sure how costly these [changes] will be compared to the damage that Musk did to Tesla by becoming Trump’s Tweedle Dee and a pariah.”Tesla does not break down its profits from regulatory credits by region, or between the three American programmes. But a person familiar with the matter said that on average as much as three-quarters came from the US, with the remainder from similar systems in the European Union and Asia.The effect on Tesla’s bottom line will not be immediate as the company often negotiates multiyear contracts with rivals that will take time to wind down. However, some of those deals included force majeure clauses and language about legislative changes that could see them voided after Trump’s bill, one of the people said.Tesla will still make money from credits overseas. It recently signed an EU emissions “pooling” arrangement with Stellantis, Ford, Mazda, Subaru and Toyota. UBS analysts said this could ultimately be worth more than €1bn if Tesla monetised its entire long CO₂ position.In the US, there is little hope of reviving US federal emission credits while Trump is in office. But California has sued over the administration’s efforts to shut down its scheme, in which Tesla has by far the biggest balance of credits.“There will be some level of credit trading until there is certainty . . . [but] the bottom has dropped out of the market long-term,” said one of the people at Tesla. “Trump has done it so fast and with such ferocity that the entire programme might just go away.”Tesla did not respond to a request for comment.The carmaker has more to lose from Trump’s agenda. Beyond selling cars and credits, it also manufactures its own batteries, runs a network of about 2,600 US EV supercharger stations, builds solar roof tiles and commercial and residential battery storage packs.Almost all of those businesses will lose significant federal support or tax relief; only energy storage subsidies remain in place. Particularly damaging will be the removal of a $7,500 federal tax credit for certain EV purchases and leases at the end of September.In response to Musk’s attacks, Trump suggested that the so-called Department of Government Efficiency (Doge), which Musk himself founded, should cancel SpaceX’s and Tesla’s federal contracts.Tesla has also warned that Trump’s unpredictable tariff policy and trade war with China will disrupt its supply chain, reduce its access to vital materials and make it a target for retribution because of Musk’s connection to the administration.“This is terrible policy and a devastating blow for Tesla’s bottom line,” said a former Tesla executive. “It’s not just Cafe in a vacuum — it’s everything together: tariffs, the $7,500 consumer credit, manufacturing tax credits, charging credits and solar residential credits.”“Elon has finally woken up to this, but talks about a day late and a dollar short,” they added.The billionaire’s power to strike back to defend his empire appears to be limited, even with his huge war chest for future political donations.Musk left his controversial role at Doge — slashing the federal bureaucracy — in May. Tensions between Musk and the White House over tariffs and the tax bill escalated in June, when he lashed out on X at the president’s signature domestic legislation.The Trump-Musk relationship has been marked by dramatic swings. Last week, Eric Trump, one of the president’s sons, told the Financial Times that he was “enamoured” by Musk, calling him “one of the great geniuses of our time”.But Musk amped up his opposition this week as the legislation faced final votes on razor-thin congressional margins.The billionaire said anyone who voted for “the biggest debt increase in history should hang their head in shame” and “will lose their primary next year if it is the last thing I do on this Earth”.Thomas Massie, a rare Republican House member who opposed the bill, thanked Musk for his “financial assistance to continue my mission as an independent voice” — after Trump vowed to oust Massie from office.But few Republicans have rallied to Musk. Fifty of 53 GOP senators voted for the legislation, with a tiebreaking vote from vice-president JD Vance.Many of Musk’s allies in the business community have also backed the bill, which would extend personal income tax breaks. James Fishback, an investor and former Doge adviser, has created a Super Pac to counter Musk’s political donations.“Preventing the tax hikes is absolutely essential,” said tech investor Keith Rabois, who donated over $2mn with his husband, Jacob Helberg, to boost Trump’s 2024 campaign. Helberg has been nominated by Trump for a top state department position.The bill cleared a final congressional vote on Thursday and will land on the desk of a triumphant president.Traina, the Trump-appointed former ambassador, said: “I have endless respect for Elon, but I think Trump carries the bigger stick here.”.© 2025 The Financial Times Ltd.

FT: ‘Elon has finally woken up’: Musk battles to save Tesla from Trump

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