December 5, 2020

What a Biden White House could mean for Tesla


Tesla CEO Elon Musk speaks at an opening ceremony for Tesla China-made Model Y program in Shanghai on Jan. 7.

Aly Song | Reuters

President-elect Joe Biden presents a mixed bag for Tesla and other electric car-makers.

On the pro side, Biden’s stated goals for clean energy and manufacturing could mean new government incentives for American manufacturers, especially electric vehicle makers. But stronger enforcement of labor, financial and other regulations could make it harder for Tesla and its mercurial CEO, Elon Musk, to push boundaries.

Both Tesla bulls and bears have the ear of the president-elect — Kynikos Associates founder and famed Tesla shortseller Jim Chanos was an early proponent for Biden, and Steve Westly, a former Tesla board member, was a big fundraiser for Biden as well.

Here’s a rundown of what investors could see during a Biden administration.

Green energy initiatives

In its Q3 earnings report, Tesla reported $397 million in revenue from environmental regulatory credit sales. That marked its fifth consecutive quarter of reported profitability, each one enabled by credit sales.

The importance of those credits suggests the company’s financial fate could swing widely with sweeping policy changes.

Luckily for Tesla and Musk, Biden’s “Build Back Better” policy goals for clean energy and manufacturing would give a shot in the arm to Tesla and other domestic electric vehicle makers including General Motors, Rivian and Lucid.

His stated goals include:

  • Building out electric vehicle charging infrastructure, adding at least 500,000 more charging stations, in the U.S.
  • Creating 1 million new jobs in the U.S. auto industry alone
  • Replacing the federal government’s vehicle fleet, including cars used for postal service and other federal business, with electric vehicles
  • Working with states to create stricter emissions guidelines for internal combustion engine vehicles
  • Surpassing China in the manufacturing of electric vehicles (including materials and parts)
  • Giving rebates, reminiscent of the bygone Cash for Clunkers program, to consumers who trade in less-efficient vehicles for newer, greener cars made in the U.S.
  • Increasing battery related research and development, domestically.

Stronger unions and regulation

The new emphasis on electric vehicles is likely a net benefit to Tesla’s autos business, depending on how much of this agenda Biden can pass through a potentially divided Congress.

However, Biden’s broader policy includes the goal of strengthening unions, which are currently absent from Tesla’s U.S. manufacturing plants.

Musk and Tesla have clashed with the National Labor Relations board in recent years. In September 2019, a California administrative law judge found that the company had violated national labor laws after Musk suggested, in a tweet, that Tesla workers would have to give up their potentially lucrative stock options if they organized.

Tesla was ordered to hold a meeting at its Fremont, California, car assembly plant with the CEO present to inform workers of their rights and say exactly how Tesla had previously broken the law. Musk was ordered to attend this meeting. However, the company is appealing the ruling.

Additionally, a Biden White House could bring change to various regulatory agencies, potentially leading to more scrutiny of Tesla and its CEO.

For example, financial regulators settled with Tesla and Musk for $20 million each after the CEO tweeted in 2018 that he was planning to take the company private at $420 per share, sending shares soaring before they were halted. The SEC did not respond when Musk provoked them with a tweet that said, “SEC, three letter acronym, middle word is Elon’s,” in July this year.

In addition, Auto safety regulators NHTSA and the FTC consumer protection agency have generally not intervened in Tesla’s practices around automated driver assistance, and how the company markets these features.

Tesla sells “Autopilot,” “Enhanced Autopilot,” and “Full Self-Driving” options that do not provide drivers with a completely hands-free self-driving experience, despite what the names imply.

Tesla even rolled out a beta version of its “Full Self Driving” software in the U.S. last month, enlisting non-professional drivers — who are its customers — to test these safety critical systems on public roadways.

Previously, the National Transportation Safety Board, which investigates crashes and can influence NHTSA with its findings, determined that driver error and Autopilot design led to a crash involving a Tesla Model S and a parked fire truck. NTSB also found that Tesla’s inadequate driver engagement monitoring contributed to a fatal Model X crash that killed Apple engineer Walter Huang near Mountain View, California in 2018.

NHTSA has heard those findings, and has the authority to issue recalls, but hasn’t where Tesla’s semi-autonomous systems are concerned. NHTSA Deputy Administrator James Owen has previously explained: “We do not want regulations enacted long before the development of automated technologies to present an unintended and unnecessary barrier against innovation and improved highway safety.”

A Biden White House could change all of that.



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