CRASHOUT: Round 2 – Musk vs. Trump

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Just when it seemed like the storm had passed, Elon and President Trump are at each other’s throats again.

And like last time, the fight coincides with the Big Beautiful Bill (BBB), which may soon eliminate federal programs which benefit Tesla.

As it currently stands, the $7,500 credit on electric vehicles (EVs) is set to expire at the end of September (according to the Senate version of the bill).

If it happens, the price of EVs in America would effectively rise by $7,500.

Also on the chopping block is what Trump calls the “EV mandate”. These are federal rules which give huge benefits to electrical vehicle makers.

Carmakers receive “carbon credits” for every EV they sell, which can then be sold to other automakers for profit. In essence, traditional car firms are required to buy these credits in order to produce traditional vehicles. This is why President Trump calls it a “mandate”.

These carbon credits are a big part of Tesla’s business. For example, in 2024, Tesla generated $2.7 billion from selling emissions credits to other auto companies. That’s a 54% increase from 2023.

In Q1 of 2025, Tesla reported $595 million of revenue from regulatory credits, while the company’s net profit was $409 million. In other words, without the carbon credits Tesla would have lost money.

So if the tax and carbon credits are ended, it could spell serious trouble for Tesla and other EV makers.

Elon Stands Defiant

Elon Musk now claims that eliminating EV credits and subsidies would benefit Tesla, because it would strengthen the American EV leader’s competitive position.

For example, Elon just reposted the following message to his massive audience on X (formerly Twitter):

Source: X

It’s clear that Elon is passionate about wanting to cut U.S. debt and deficits. His efforts at DOGE were noble, even if largely unsuccessful.

But it is also clear that Tesla could be hurt severely by the removal of EV subsidies.

I suspect this feud has more to do with the latter. But Elon doesn’t want to be seen as needing government help for his businesses to thrive. So officially at least, his opposition to the BBB is based on his desire for fiscal responsibility.

But Elon seems especially upset that his industry’s subsidies are under threat, while the oil and gas sector’s benefits remain untouched.

Musk said the BBB is, “Utterly insane and destructive. It gives handouts to industries of the past while severely damaging industries of the future.” There is a bit of truth there. Oil and gas companies do get certain tax benefits, primarily the ability to write off drilling costs in an accelerated manner.

Personally, I’m torn on this issue. Elon Musk has built 2 of the only recent American industrial success stories (Tesla and SpaceX). These companies have generated a huge amount of wealth and jobs here in the U.S. Like it or not, government subsidies helped these companies succeed.

So while no government interference would be preferred, in the real world we’re competing with China, a country which offers huge support to its industrial giants.

We may have to continue to offer some government support to key industries. But it should be done in the fairest, most transparent way possible.

The EV-specific carbon credits should be eliminated, because they are actively harming traditional car companies and providing an unfair advantage to EV firms. But some sort of support for domestic car makers will likely be required for American firms to remain competitive.

To keep things fair for all domestic carmakers, tariffs should be the primary tool used here. And that’s likely what President Trump is planning to do.

Elon’s Nuclear Option

As a private citizen, Elon Musk still wields considerable power. His big threat over the past few weeks has been to launch a new political party.

Source: X

Musk recently donated a large sum of money to Kentucky Congressman Thomas Massie. Massie is a Republican who has been threatened by Trump with a primary challenge due to his opposition to the BBB and strong anti-war stance.

If Musk does start a new party and runs a presidential challenger (such as Thomas Massie) in 2028, it would mostly pull votes from the Republican side. He’d likely only need to draw a few percentage points to play spoiler.

A new Elon-backed political party could allow even a weak Democratic candidate for President to pull off an upset victory. This is a real possibility, and we shouldn’t underestimate Musk’s ability or determination.

With an estimated net worth of $405 billion, Elon Musk is not a good enemy to have. I hope that President Trump and he can mend their relationship, for the sake of the country.

Otherwise we could end up splitting the conservative movement into two blocs: MAGA vs Elon’s new libertarian-leaning party. Such a breakup could give the DNC a chance to regain Congress and even the White House.

We’ll keep a close eye on this story.

(Full disclosure: I currently have a small position in Tesla put options. Thus far it’s been a losing trade, so readers are advised not to follow on this one. I am simply disclosing this in the interest of transparency).

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