Thursday saw former President Trump propose an end to federal support and contracts for businesses owned by Elon Musk, marking the intensification of a personal dispute with the wealthiest individual globally. In his remarks, Trump stated that a simple way to save significant sums in the nation’s Budget would be to terminate Musk’s governmental assistance and contracts. If these threats were to come into effect, Musk’s wealth could take a substantial hit. Both SpaceX and Tesla, Musk’s most significant ventures, receive considerable benefits from a broad suite of government programs, including contracts for lunar explorations and incentives for electric vehicles.
On receiving Trump’s threats, Musk retorted with one of his own, claiming that he could potentially halt the SpaceX program for manned space flights. Shareholders are taking these heated exchanges quite seriously, as demonstrated by Thursday’s interactions between the two moguls, which coincided with a marked 14% decrease in Tesla’s share price.
In the last ten years, SpaceX, Musk’s rocket venture, has garnered federal funds amounting to tens of billions of dollars, including an eye-watering $3.8 billion for the fiscal year 2024 itself. The dominant portion of these federal grants originates from the National Aeronautics and Space Administration (NASA). NASA has disbursed billions to SpaceX over the previous decade to facilitate the travel of astronauts and supplies to and from the International Space Station.
Notably, in recent years, NASA conferred more than $2 billion on SpaceX for the purpose of designing and constructing a lunar lander. These investments are integral to NASA’s Artemis program, which aims to make humanity set foot on the moon once more, approximately half a century since the last lunar sojourn.
However, NASA isn’t the only federal agency providing financial aid to SpaceX. The Department of Defense, for instance, has granted the company hundreds of millions in exchange for launch services. Furthermore, earlier this year, SpaceX was expected to secure a multi-billion-dollar contract to modernize the Federal Aviation Administration’s outdated air traffic control communication systems.
Tesla, on the other hand, receives smaller amounts of direct federal grants compared to SpaceX but indirectly generates vast sums annually due to an array of state and federal programs. These disparities could engender conflicts between the two enterprises. From time to time, the federal government has signed agreements to buy vehicles from Tesla.
Notably, when Tesla customers purchase an electric vehicle, they also get the benefit of a $7,500 federal tax credit. This initiative was put into place to boost the sales of electric cars, including those manufactured by Tesla. However, under new policies, many of these incentives could be terminated or subjected to novel limitations.
The revocation of these tax benefits may incur a loss of around $1.2 billion for Tesla, as estimated by JPMorgan Chase. Despite such a massive loss, Musk has, in the past, demonstrated indifference towards the prospect of phasing out electric vehicle tax benefits. Claiming that the removal of the subsidies would only benefit Tesla, Musk expressed this viewpoint last year.
That being said, Tesla recently campaigned for a ‘sensible wind down’ of certain renewable energy tax credits. The company argued that an immediate shutdown of these incentives could potentially undermine America’s energy independence. Musk harshly criticized the new policy proposal, terming it an ‘abhorrent monstrosity’, thereby triggering further hostilities with President Trump.
Tesla’s early development was not without federal support, however. Indeed, Tesla secured a substantial $465 million loan from the Department of Energy back in 2010, intended to spur the production of electric vehicles. The company subsequently repaid this loan a few years down the line.