Improved relationship with Musk? Trump clarifies he will not "destroy" Musk's company

Trump posted that everyone says I will destroy Elon’s company by stripping Musk of the massive subsidies he gets from the US government, but that’s not the case!

Written by: Bao Yilong

Source: Wall Street Journal

Trump stated that he would not "destroy" Elon Musk's company by eliminating government subsidies and hopes that all American businesses, including Musk's, can "thrive."

On Thursday, Trump posted on his social media platform, responding to claims about his plans to take action against Musk's company. He stated:

Everyone says I will destroy Elon’s company by depriving him of some (if not all) of the massive subsidies he receives from the U.S. government, but that is not true! I want Musk and all businesses in our country to thrive, in fact, to thrive more than ever before!

Trump wrote:

The better they do, the better America does, and that is good for all of us.

This statement comes as Musk's company faces increasing political and financial pressure. Previously, Wall Street Journal mentioned that Musk warned during the earnings call that Tesla could face "a few tough quarters" due to tariff costs and the impending expiration of U.S. electric vehicle incentives. On Thursday, Tesla's stock closed down over 8%.

Increasingly Tense Relations

Trump's clarification comes at a time when the "war of words" between him and Musk has been escalating for months.

The public conflict between the two began when Musk opposed Trump's signature spending bill, which then evolved into mutual attacks. In June of this year, Trump threatened to cut some of Musk's government contracts.

Despite their once close relationship—Musk led Trump’s "Office of Government Efficiency" and invested hundreds of millions of dollars into his re-election campaign—it has clearly deteriorated now.

Elon Musk's business empire is closely linked to the U.S. government, involving funding on a scale of hundreds of billions of dollars, which makes any shift in political winds a major concern for the market:

• SpaceX: According to data from the research organization FedScout, since 2008, this reusable rocket manufacturer has secured over $22 billion in contracts from collaborations with federal agencies such as NASA, the Air Force, and the Space Force. Reports indicate that the Trump administration recently reviewed SpaceX's contracts to look for cuts, but after evaluation, found that most of the contracts were critical.
• xAI: Musk's newly established artificial intelligence company has also ventured into government business. The Pentagon announced on July 14 that it has awarded contracts worth up to $200 million to xAI and three other artificial intelligence companies.

Tesla's "Regulatory Dividend" and Financial Risks

For Tesla, the risks come not only from direct contracts but also from a heavy reliance on regulatory credit income generated by government regulations.

According to an analysis by FedScout CEO Geoff Orazem, Tesla has generated $12.24 billion in revenue from the sale of "auto regulatory credits" (i.e., environmental credits) since 2015. In the second quarter of 2025 alone, this revenue reached $439 million. These credit sales are directly accounted for in Tesla's profits and have become a key component of its profitability.

This incentive mechanism originates from federal and state regulations in the United States, which require automakers to sell a certain number of low-emission vehicles; otherwise, they must purchase credits from companies like Tesla that have excess credits.

Tesla itself is also clearly aware of the risks involved. In the quarterly financial document submitted on Thursday, the company specifically mentioned the "Big Beautiful Bill" supported by Trump in the "Risk Factors" section and warned that:

The loss of previously available tax credits and carbon offset mechanisms may have further negative impacts on our financial performance, while the provisions of the bill may affect battery costs and consumer spending, thereby negatively impacting demand.