Tesla CEO Elon Musk has publicly voiced strong support for Republican US presidential candidate Donald Trump. They have even aligned on the issue of opposing EV subsidies, resolving their previous differences. This shift is rooted in Musk's falling out with California Democrats since the Covid pandemic.
The fallout led to Tesla's headquarters moving to Texas, a Republican stronghold. Now, both SpaceX and X (formerly Twitter) are also relocating their headquarters from California to Texas, highlighting Musk's deep dissatisfaction with the Democratic Party. Musk now openly backs Trump and plans to donate US$45 million per month to show his support.
Trump is against government intervention rather than EVs
With such strong backing from Musk, Trump is softening his stance on electric vehicles (EVs). Recently, Trump even publicly declared, "I love Musk." Trump's current stance on EVs is that as long as the government does not force people to buy them, he is okay with them.
This is a clear statement of Trump's opposition to the Biden administration's Inflation Reduction Act (IRA), which uses federal funds to encourage Americans to buy EVs. Trump has stated that if elected, he will end the Biden administration's EV policies.
However, Trump also mentioned that he is not opposed to the widespread adoption of EVs, even saying, "I fully support electric vehicles," indicating that his opposition lies in government subsidies interfering with the free market competition between EVs and gasoline vehicles.
Musk fully agrees with this, reiterating that he can accept the government canceling EV purchase subsidies. Musk stated, "Many people think Tesla survives on EV subsidies; this is true for our competitors but not for Tesla."
The data backs up Musk's claim, as Tesla certainly didn't rely on EV purchase subsidies to secure its current position as the global leader in the EV market. Even before the Biden administration's IRA was legislated in August 2022, Tesla had already generated profits for the first time due to rapidly increasing EV sales since 2020.
This sales growth momentum continued, covering most of the time Musk claimed as Tesla's first rapid growth period. This showcased that Tesla could still grow rapidly without relying on federal tax incentives.
Musk's fallout with California and the Democrats
The root cause of Musk's fallout with California and the Democratic party traces back to the Covid pandemic in 2020 when Musk and the California Democrats disagreed over whether Tesla employees at its Fremont plant should quarantine.
At that time, Tesla was in the early stages of its first significant EV sales surge, thus it was a critical period to determine its ability to continue generating profits. Musk didn't want quarantine policies to halt production at the California plant's assembly line, which at the time was Tesla's most relied-upon site globally. He felt the government's response was overreacting.
This stance clashed with the opinions of California Democratic union leaders, deepening the rift. Musk expressed significant dissatisfaction over this issue and has repeatedly and publicly criticized the California government's quarantine measures. Eventually, the Fremont plant resumed production, but the incident strengthened Musk's resolve to move Tesla out of California.
Musk followed through with this idea about a year later, relocating Tesla's headquarters to Austin, Texas as Tesla was building a new factory there.
Despite this, California remains important to Tesla. In 2023, Musk and Governor of California Gavin Newsom announced the establishment of an "engineering headquarters" at Tesla's Palo Alto office, signaling a gesture of reconciliation. They publicly declared that while Texas might be Tesla's new home, Musk still values California.
Regarding Musk's shift, Trump's running mate JD Vance's recent comments during an interview are rather apt. He stated that "...Musk is in some ways a throwback to an older generation of American entrepreneurs. He builds real things like cars and rockets. I think that's the kind of economy President Trump wants to create."
