Today’s Financial Times has a large picture of the victorious Trump family above the fold (as they used to say when physical paper was king, and meaning the most important spot) on page one. What’s particularly striking to me is that Elon Musk, billionaire, maker of the best-selling EV in the US is in there as well. Not only that, he has a prominent position on the right side. Musk, who is reportedly the only Fortune 100 CEO to have endorsed Trump, pumped $130 million into the campaign and using his social media platform X as a get out the Trump vote device. Presumably, this is the first step in payback for his support as well as a possible indication of the influence he will have.
My guess is that, Musk’s personal political views aside, this is all about Tesla. During his first term, Trump was a strong oil and gas drilling, as well as traditional gasoline-fueled automobiles. He attempted to lower minimum gas mileage regulations for cars, for example–bad for climate change but good for oil drillers and for carmakers in Detroit, the caboose of the auto innovation train. He was thwarted, however, by plans by California, driving capital of the US–to set higher standards for cars operating in that state.
This time, I think, the issue is more life-threatening for Tesla.
It’s that the newest, shiniest, coolest EVs in the world come from China. And they’re maybe a third the price of a Tesla. Chinese EVs have already blown away the competition in the EU. We’ve already seen a similar phenomenon in the US with the arrival of Japanese brands of combustion engine cars in the early 1970s and again with Korean offerings in the mid-1980s. Initially, Japanese cars weren’t great, but they were counter-culture and they were cheap. The initial appeal of Hyundai and Kia was mostly price. Buyers generally were people who couldn’t afford an American or Japanese brand. And at first Kias were pretty awful, too. (It was clear to me that Korea was a stock market heavily stacked against outsiders, so I’d tended to avoid it. But I happened to be doing some M&A work in Seoul as the Korean automakers were entering the US and was shocked to see how good Hyundais were.)
Presumably, Musk wants tariff protection against Chinese EV imports. My guess is that he’ll get it. That’s a mixed blessing, though, because it will only accelerate Chinese plans to build EV plants in the US.