How Elon Musk's clout with Donald Trump could enrich his companies

Elon Musk’s backing of Donald Trump’s decisive victory for a second presidency gives the billionaire entrepreneur extraordinary influence in business

Elon Musk’s backing of Donald Trump’s decisive victory for a second presidency gives the billionaire entrepreneur extraordinary influence to help his companies secure favorable government treatment.

Musk contributed at least $119 million to a pro-Trump spending group, federal records show, and tirelessly touted the former president at the critical late stage of his campaign.

Musk's politicking reflects a wider strategy to insulate his companies from regulation or enforcement and boost their government support, according to Reuters interviews with six Musk-company sources familiar with his political and business dealings and two government officials who have extensive interactions with Musk firms. The sources provided a rare view of the strategising inside Musk's firms to take full advantage of his deepening relationship with Trump.

Musk's business interests - from Tesla electric vehicles to SpaceX rockets and Neuralink brain chips - depend heavily on government regulation, subsidies or policy.

“Elon Musk sees all regulations as getting in the way of his businesses and innovation,” said one former top SpaceX official who spoke on condition of anonymity. “He sees the Trump administration as the vehicle for getting rid of as many regulations as he can, so he can do whatever he wants, as fast as he wants.”

Musk endorsed Trump on July 13, the day the candidate was shot in the ear in a Pennsylvania assassination attempt. Musk's donations financed an extensive get-out-the-vote effort as Trump faced a stiffer challenge after Vice President Kamala Harris replaced President Joe Biden in July as the Democratic presidential nominee. Musk spent election night with the president-elect at his Mar-a-Lago club in Florida, and Trump has said he would name Musk as his administration's "efficiency czar."

Tesla, SpaceX, Neuralink and Musk did not respond to requests for comment. The Trump campaign called Musk a "once-in-a-generation industry leader" in a statement to Reuters, adding that the "broken federal bureaucracy will certainly benefit from his ideas and efficiency."

Musk once fashioned his image primarily around fighting climate change by building electric cars to reduce pollution and rockets that could one day help humans flee to Mars from a dying Earth. He's now at the forefront of a growing class of Silicon Valley billionaires championing a libertarian movement as a backlash to the California region's historically liberal ideology - which Musk now derides as a “woke mind virus.”

His rising political involvement could put his industrial empire in a position that current and former employees likened to the Gilded Age, when industry barons such as J.P. Morgan and John D. Rockefeller held broad sway over government policy impacting their businesses and wealth.

Musk’s growing power excited his backers who view government as an impediment to his high-tech operations, including Shervin Pishevar, a venture capitalist who has invested in SpaceX and advocated for Silicon Valley’s shift toward Trump. Cutting regulation, he said, would speed SpaceX's efforts to get to Mars.

“He’s going to make America function like a startup,” Pishevar said of Musk. “There’s no greater entrepreneur in American history than Elon Musk."

Driving auto policy

Musk’s political ascension comes after perceived slights under the Biden administration that accelerated Musk's embrace of Trump’s right-wing populism. For example, Tesla wasn’t invited to an August 2021 EV summit at the White House that featured only unionised Detroit automakers that produce a fraction of the EVs Tesla sells.

The fortunes of Tesla could rise or fall depending on Trump's treatment of the diverse array of subsidies, policies and regulatory schemes for electric and autonomous vehicles. Democratic administrations have historically championed many such pro-EV policies, with Tesla's support. Musk could potentially now protect them despite the Republican party’s traditional rejection of EVs - and Trump’s ridicule of Biden’s EV policy on the campaign trail.

For Tesla, Musk’s goals include getting the U.S. National Highway Traffic Safety Administration (NHTSA), its primary federal safety regulator, to hold off on potential enforcement actions involving the safety of Tesla’s current driver-assistance systems, called "Autopilot" and "Full Self-Driving," according to a person familiar with the matter.

Musk's "primary focus over the next four years," the person said, would be "de-enforcement."

Musk, the source said, could also push for favorable regulation of autonomous vehicles and robotaxis that Tesla plans. For his new artificial intelligence startup xAI, Musk could shape nascent rules or a new agency, the person said.

Musk said last month that he expects to roll out driverless Teslas in California and Texas by next year and start production in 2026 on a fully autonomous “Cybercab” with no steering wheel or pedals. Tesla would need a waiver from NHTSA to produce such a vehicle.

There are no nationwide regulations governing how autonomous vehicles can be deployed. That means operators have to deal with different regulations in each state. Musk bemoaned the challenges of the state-by-state regulatory landscape in a Tesla earnings call last month and advocated for one federal approval process.

Brian Mulberry, client portfolio manager at Zacks Investment Management, a Tesla investor, said a streamlined, uniform set of autonomous-driving regulations may provide Tesla the biggest boost of any policy Musk might influence. A "slimmer, trimmer federal Department of Transportation that gives common-sense guidelines" would give Tesla "room to prove their case" for the technology's safety, he said.

Despite Musk’s complaints of stifling bureaucracy, SpaceX currently leads the world in government-financed rocket launches and Tesla sells nearly two million heavily subsidised EVs annually.

Tesla shares closed up about 15% on Wednesday.

At his brain-implant startup Neuralink, Musk has long complained that the U.S. Food and Drug Administration approval process has slowed the firm from implanting the device in humans. Musk could use his rising clout in a Trump administration to cut through some of the safety-related approvals in that process, according to a source familiar with the company’s operations.

Musk has long expressed frustration about the FDA's pace. Some Neuralink employees are considering the prospect that Musk, if he becomes Trump’s “efficiency” chief, could get FDA officials he deems inefficient fired, said a person familiar with the matter.

Growing power

Musk’s designs on setting up a lax regulatory environment come as his companies already face fewer regulatory requirements and softer enforcement of current federal rules, according to the six Musk company sources familiar with his regulatory dealings and political strategy. Some federal agencies already struggle to muster the political will to go after Musk companies for alleged policy violations or safety issues, they said, in part because Musk is the dominant player in highly-regulated and politicised industries such as electric cars and rockets.

NASA, for instance, has relied on SpaceX’s know-how in missions such as the expected rescue of Boeing’s Starliner astronauts who are still stranded in space.

NASA and other agencies often try to avoid alienating the company, said a federal official who is familiar with the company’s government interactions and spoke on condition of anonymity. “NASA needs SpaceX more than SpaceX needs NASA,” the official said.

NASA has invested more than $15 billion in SpaceX. SpaceX is also separately developing a network of hundreds of spy satellites with a U.S. intelligence agency, Reuters has reported.

A Reuters investigation last year documented at least 600 worker injuries at SpaceX facilities nationwide and found that Musk’s rocket company disregarded safety regulations and standard practices. Worker injury rates at SpaceX facilities also continued to exceed an industry average last year, according to a Reuters review of safety data.

Neither NASA nor OSHA, which regulates worker safety, has taken any significant enforcement action against SpaceX over worker injuries and related reporting violations. NASA declined to comment on Musk’s potential influence after Trump’s election.

Musk has nonetheless excoriated the government for trying to enforce the rules even as his company has moved faster than competitors. In an interview before the election, he described federal enforcement as overly harsh and said he aimed to get rid of “insane” regulations.

“Eventually, you just can’t get anything done,” said Musk during an appearance at the All-in Summit, a gathering affiliated with a tech podcast by the same name.

However, the U.S. government does not regulate the safety of participants in private space flights in orbit due to a temporary congressionally imposed ban on the agency’s oversight, to encourage innovation in the industry. A Trump administration, influenced by Musk, is expected to push for softer regulations on this front, according to four SpaceX sources familiar with its regulatory strategy.

Musk and SpaceX see the company’s dominance as evidence that it can handle less oversight, the sources said, even as an unfettered Musk could have unintended consequences for the industry.

One former SpaceX official cautioned that taking a lax regulatory attitude in a sector as dangerous as rocket-building "could blow up in everyone’s face and set back the industry for a decade.”

Published - November 07, 2024 08:45 am IST