Tesla CEO Elon Musk is, to put it gently, a fairly controversial individual. Most automotive CEOs aren't watched by the public as closely as Musk, nor are their political ramblings—if they happen in public at all—given the same attention. But for Musk, his political identity, and where he's reportedly putting his dollars, could spell trouble for Tesla.
Welcome back to Critical Materials, your daily roundup for all things EV and automotive tech. Today, we're chatting about Elon Musk's political endorsements, EV tax credits confusing consumers, and the eventual stabilization of EV depreciation. Let's jump in.
30%: Elon Musk Commits $45 Million Per Month To Pro-Trump Super PAC: Report
Musk, once a hero of the left looking to the Tesla CEO as someone who will lead the charge to protect against climate change, has taken a sharp right turn (politically, that is) in recent years. But he may soon be making a huge financial commitment to a candidate who has been vehemently opposed to EVs, stricter fuel economy and emissions mandates or EV subsidies.
A new report from the Wall Street Journal reveals that Musk plans to commit millions of dollars to America PAC, a brand-new Super Political Action Committee (PAC) that promises to register voters, persuade constituents to vote early, and convince people in swing states to request mail-in ballots. Essentially, it's a right swing on the Democratic "get out the vote" campaign.
Musk, one of the richest people in the world with an estimated wealth exceeding $250 billion, is said to have committed around $45 million per month to the Super PAC.
From the Wall Street Journal:
While it can be difficult to trace the full scope of some political giving, the largest known donation of the 2024 election so far is $50 million given recently by the great-grandson of banker Thomas Mellon to a super PAC supporting Trump.
America PAC has hired hundreds of employees for its efforts, and has been registering voters, having conversations with constituents in swing states and urging voters to request mail-in ballots, some of the people familiar with the matter said.
According to a filing made on Monday, America PAC had $8.75 million in contributions for the three-month period ending on June 30. Musk had indicated that he planned to start his donations in July, one of the people said.
Musk has previously denounced donating money directly to either Trump or Biden's election campaigns. He has also described himself as "centrist," and despite previously going toe-to-toe with Trump—who once described Musk as a "bullshit artist"—over EV subsidization, the CEO appears to have become closer with the former president. In fact, Musk says that Trump is a "huge fan" of the Cybertruck and "calls [him] out of the blue for no reason."
Following an attempted assassination of the former president over the weekend, Musk announced his full endorsement of Trump for president on X.
To be very clear, Musk is free to do as he wants here. However, Trump's previous administration, current campaign, and other members of his supporting political party have historically been anti-EV.
Even as recent as May, the former president reportedly told oil executives that he would end EV incentives should he receive enough campaign donations and be elected, according to a report by the Washington Post.
Trump's recent pick for Vice President, J.D. Vance, has also shown to carry a fairly tough stance against the EV industry. The could-be VP introduced the Drive American Act last year which would not just repeal EV tax credits, but would instead repurpose them for new gas and diesel-powered vehicles built domestically.
And if legal proposals and promises aren't enough to convince you that there are problems ahead, let it be known that the public sees what is going on and is actively looking for Tesla alternatives, at least partly attributed to Musk's "recent behavior."
But hey, maybe he's changing his tune lately:
Regardless of how you vote, politically-charged conversations are never easy. Posing up your ideals against another person's always carries the chance of diverting from civility, which is often why politics and business are kept separate. Musk, perhaps one of the most well-known CEOs of our lifetime, isn't one to keep his views quiet in this area, and now that could hurt Tesla.
60%: EV Tax Credit Changes Are Still Confusing Consumers
The EV tax credit has been a great tool to bolster the adoption of EVs in America. There's just one problem: it's kind of confusing.
Cars need to be priced under a certain threshold, buyers need to make under a certain amount, the car's final assembly has to be in North America, and—the most confusing part of all—some of the vehicle's parts (including the minerals used in the car's battery) can't be sourced from particular countries. This has led to some buyers being unsure of whether they qualify for the tax credit and completely disregard EVs altogether due to the confusion.
It's not just a small percentage of the population confused by these tax credits either. A new study by J.D. Power reveals that 40% of buyers don't understand the incentives provided by the EV tax credit. Furthermore, many buyers are also unsure of complementing incentives that may be provided by their state, local municipalities, and utility providers.
From Automotive News:
Consumers who know about the federal incentives are nine times more likely to consider purchasing an EV, but more than 40 percent of car shoppers said they did not have a good understanding of incentives, according to a 2024 survey by J.D. Power.
Dealers need more automaker support to educate consumers on EV cost, especially with the complex array of discounts and fees from states, utilities and automakers, [said Stephanie Valdez Streaty, Cox Automotive's director of industry insights].
The shift to electrification is clearly a bit difficult for consumers to realize. Not only do they need to understand financial benefits like the EV tax credit, but they also have to re-learn car ownership. There's less maintenance than gas-powered vehicles in certain areas (like oil changes) and more maintenance in others (like tire changes). Likewise, understanding how and where to charge is a big ask that many buyers who have pumped gas for decades just don't grasp right away.
Here is a list of vehicles that have some trims covered by the EV tax credit, at least partially, at the time of writing:
- Acura ZDX
- Cadillac Lyriq
- Chevrolet Blazer EV
- Chevrolet Bolt EUV
- Chevrolet Bolt EV
- Chevrolet Equinox EV
- Ford F-150 Lightning
- Honda Prologue
- Nissan Leaf
- Rivian R1S
- Rivian R1T
- Tesla Model 3
- Tesla Model X
- Tesla Model Y
- Volkswagen ID4
That list is expected to quickly grow as more EVs are built stateside—signaling that the EV tax credit requirements and protectionist tariffs are doing their job. And as always, the tax credit applies across the board when an EV is leased.
Several automakers have committed to building plants in the U.S. to ensure that their vehicles qualify for the EV tax credit, including Hyundai. So while the above list might seem small now, it's only a matter of time before additional vehicles are added. Now comes the hard part: educating consumers and dealers.
90%: Used EV Values Are In The Toilet But May Soon Stabilize
You might have noticed that used EV values kind of stink. Unlike gas-powered vehicles, used EV pricing isn't clear-cut—there's a multitude of factors that play into the worth of second-hand, battery-powered cars.
The uncertainty of how well a car will hold its value has kept some consumers from buying EVs. Fortunately, experts believe that the market won't always be that way and is on its way to stabilizing.
From Automotive News:
ALG, which publishes the Automotive Leasing Guide, trimmed EV residual values this year to account for ongoing pricing volatility and increased incentive spend. The change extends beyond Tesla. ALG is considering other automakers' EV price cuts, such as those Ford Motor Co. has made to the Mustang Mach-E and F-150 Lightning.
Market dynamics affect EV residual values over time. Though EV values seem uncertain now, they could become more predictable as sales grow through the decade, experts told Automotive News.
ALG predicts how much a vehicle will be worth in the wholesale market two, three or four years into the future. Auto financing companies use ALG's residual values to set monthly lease payments, and the values are an important factor for calculating the total cost of owning an EV over time.
"Long term, we don't see as much risk for EVs as we see today," said Tyson Jominy, J.D. Power's Vice President of data and analytics. He later continued: "The further out you go, the less impact there is."
J.D. Power estimates that vehicles on a 36-month lease returned in July or August 2027 will retain about 53% of their value. While that might seem like a drastic drop, it's important to point out what that same residual value looks like in today's market. J.D. Power says that in 2023, EVs retained just 41% of their value after a 36-month lease.
Comparatively, all vehicles (including EVs and combustion-powered cars) retained 66% of their value on average. This means that EVs still aren't predicted to be on par with the entirety of the market average by 2027, but will grow substantially closer to it.
Residual value is also expected to improve as automakers add more EVs to their fleet. With battery-powered cars still being a new technology, pricing on components and innovation are fluctuating constantly. This economies of scale approach, combined with EVs being commonplace, can lead to a rather rapid drop in new car costs and more stability on the bottom line.
"The vehicles will be very normal to most consumers, and therefore the residual values will start to reflect more of a true market dynamic as opposed to today," said Jominy.
For those who want an EV today but don't want to risk depreciation, perhaps consider a lease. EV lease deals have been absolutely bonkers with some automakers over the past few months, with some popular choices falling well under $300 per month.
100%: Have You Been Burned By EV Depreciation?
Anyone buying a new car knows that they're going to take a bath on depreciation when buying a new car. When I bought my Tesla Model 3 Performance last year for $52,990, I knew I would be in the boat too, but I didn't realize just how bad the market would take a nosedive.
On the plus side, I take a bit of solace knowing that it doesn't hurt as much as an EQS owner who ate 47% of the car's value—or a whopping $65,000—in just a year.
So let's make each other feel better here, folks. How many of you have been burned by the depreciation of their EVs? Let me know in the comments.
