Trump and Musk: masters of pork

Last week Tesla passed Ford in market cap. Today it passed GM. Why Trump wants to prop up the ailing giants.

In some ways, Elon Musk (Forbes wealth: $US15.2b) and Donald Trump ($US3.5 billion) are far apart.

Mr Musk – an immigrant to the US from South Africa – built Tesla around products that help solve climate change: electric cars and batteries to collect energy generated by solar power (and a few rockets on the side with Space X). The market likes it. Last week Telsa passed Ford in market cap. This morning, it nudged ahead of General Motors as Tesla shares hit $US312.36, valuing the company at $US51.54 billion to GM’s $US50.22 billion.

Mr Trump thinks climate change is a hoax and is cutting regulations in an attempt to prop up West Virginia’s flagging coal industry. He’s also using the stick of threatened tariffs to coerce GM and Ford to bring more production back to the US, plus the carrot of relaxing vehicle emission regulations (Musk was made a member of the president's Strategic and Policy Forum, but behind a show-pony meeting this hasn't meant much Trump's emission's move). 

You could say that if a Republican president must meddle with industry, then why not back the fast-growing Tesla (2010 employees: 3000; 2013: 6000; 2016: 18,000; 2017: 25,000)?

Part of the problem is that although Hillary Clinton handily won the popular ballot, by 66 million (48.0%) votes to Mr Trump’s 63 million (45.9%), the White House is actually decided by the state-by-state Electoral College race – which Mr Trump carried by winning swing states in the rust belt. GM and Ford are in the rust belt while Tesla is in Democrat-voting California and Nevada. There are no prizes for guessing which states will get the most Trump administration pork.

But it’s also worth noting that Tesla is not in particular need of federal handouts because it’s been so stunningly successful in grabbing them at the state level.

Mr Musk’s company received $US34 million from California to convert an old GM plant into a Tesla factory that can make up to 100,000 electric vehicles a year (it opened in 2014).

And over the next 20 years, Tesla will receive a stunning $US1.3 billion in tax breaks and other benefits from the state of Nevada, which will be home to the “Gigafactory” that will help it lift vehicle production to 500,000 a year after it opens in 2018.

Mr Musk played off Nevada, Texas, California, Arizona and New Mexico when he went looking for a home for the Gigafactory. All baulked at his demand for $US500 million in cash up front, but his $US1.3 billion deal with Nevada is still a US corporate welfare record. Mr Trump probably has a grudging admiration for such deal-making skills.

Tesla will open its first service centre in Auckland at 501 Karangahape Rd later this year. It already has a 'super charging' station in that location and promises a network around the country.

Mr Musk's decision to expand to New Zealand must have been helped by the government's multi-million package designed to boost the number of electric vehicles on our roads. It includes an exemption from road user charges, a $6 million fund to help electric vehicle projects and a new provision to allow electric vehicles to drive in bus lanes.

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