Download: Tesla, and a Biden White House
Joe Biden’s presidency presents an assortment of pros and cons for Tesla and electric car manufacturers in general.
Biden is on record lobbying for stronger regulations enforcement, which includes but is not limited to financial and labor regulations, on American manufacturers. This potential clampdown by way of better enforcement and, perhaps, additional regulations may prove to hinder the electric vehicle giant and its effervescent CEO, Elon Musk.
The upside is that the president-elect’s manufacturing and clean energy agenda may bear fruit to new government-backed incentives for domestic manufacturers, especially clean energy and electric vehicle companies like Tesla.
Moreover, the waters are further muddied by the fact that both Tesla bulls and short-sellers are in Biden’s list of significant fundraisers.
On one end are bulls like former Tesla board member Steve Westly while on the other are Tesla short-sellers such as Jim Chanos, founder of New York-based investment company Kynikos Associates.
Here’s what investors can expect in Joe Biden’s tenure as president.
The Clean Energy Initiative
Tesla has now been profitable for five straight quarters, which is attributed to environmental regulatory credit sales. In Tesla’s latest Q3 earnings report, the company listed a $397-million revenue from its credit sales.
Given the significance of these credit sales to Tesla’s profitability, it’s easy to see how policy changes across the board can have a big impact on the company’s financials.
Nonetheless, Tesla, along with other US-based vehicle manufacturers such as Lucid, General Motors and Rivian, may be able to find refuge within the policy goals for clean energy and manufacturing of Biden’s “Build Back Better” plan.
Relevant policy goals are:
- Charging infrastructure for electric vehicles in the US – 500,000 more, at least
- Creation of a million new jobs within the U.S. auto industry
- Employing electric vehicles to replace the federal government’s fleet of vehicles, which includes vehicles used for postal service and other federal business
- Stricter emissions guidelines on the state-level for vehicles running internal combustion engines
- Becoming the world leader in electric vehicle manufacturing; surpassing China
- Offering rebate incentives for consumers to trade in vehicles that are less efficient for greener, newer vehicles made in the U.S. – similar to the Cash for Clunkers program of old
- An increase in battery-related R&D within the U.S.
Regulations and Unions
Biden’s agenda is leaning towards the benefit of Tesla’s vehicle business. Of course, it remains to be seen which of the president-elect’s policies materializes or if ever they can pass through, what seems to be, a divided congress.
Moreover, Biden’s policy goals also include unions and efforts to strengthen them, which Tesla CEO, Elon Musk, isn’t exactly enthusiastic about given his and Tesla’s recent clashes with the National Labor Relations board.
Note that back in 2019, Musk questioned, in a tweet, why should Tesla workers “pay union dues and give up stock options for nothing.” In a California administrative hearing in September of the same year, the judge found Tesla to have violated national labor laws as per Musk’s tweet.
Tesla was then instructed to hold a meeting in its car-assembly plant in Fremont, CA, with Musk, as the CEO, present and to inform the employees of their rights while divulging details of how the company had broken the law. Tesla is currently appealing the prior ruling.
Furthermore, a Biden administration, with its policy goals for stronger regulations enforcement, could potentially bring more scrutiny to the company granted its history with regulators and Musk’s recent provocation.
In 2018 both Musk and Tesla had to each settle $20 million with financial regulators after the CEO’s tweet of taking the company private, which sent the share prices through the roof. Moreover, the SEC has yet to respond (if it ever plans to respond) to Musk’s provocative tweet in July 2020.
Scrutiny of Tesla could perhaps bring to light its business practices for automated driver assistance and how these features are marketed to consumers. Both the NHTSA and FTC have yet to intervene or formally question Tesla regarding these matters.
Note that Tesla markets its vehicles’ automated driver assistance options as Autopilot, Enhanced Autopilot, and Full Self-Driving. Despite the name implications, however, all of these options fail to deliver a totally hands-free driving experience.
For the time being, the NHTSA seems to be leaning in favor of Tesla and the innovations that come with the company’s electric vehicles and self-driving technology.
The auto-regulatory body has previously heard and investigated crashes involving Tesla vehicles including one in which Walter Huang, an Apple engineer, was killed. And while both the NHTSA and NTSB found faults in Tesla’s automated driver assistance and semi-autonomous driver technologies, a recall has yet to be issued.
James Owen, NHTSA Deputy Administrator, said that the regulations passed before the development of automated technologies should not present an “unintended and unnecessary barrier against innovation and improved highway safety.”
Improved regulations enforcement can change the status quo.