Assessing the Link Between Elon Musk's Political Influence and the U.S. EV Rollback

The narrative linking Elon Musk's political influence to the U.S. electric vehicle rollback is grounded in a specific claim and a concrete policy action. Investor Ross Gerber, co-founder of Gerber Kawasaki, encapsulated a growing sentiment by stating that Tesla CEO Elon Musk is "personally partially responsible" for the deceleration of the U.S. transition to sustainable transportation. This view stems from Musk's deep ties with President Donald Trump, a relationship Gerber notes was instrumental in securing Trump's second term.

The policy change itself is a major reversal. In December 2025, the Trump administration finalized a rollback of Biden-era Corporate Average Fuel Economy (CAFE) standards. The White House framed this as "delivering a win for American families and automakers," arguing the previous targets were "costly and unlawful" and effectively constituted an "electric vehicle (EV) mandate." The move resets fuel economy requirements to levels that can be met with conventional gasoline and diesel vehicles, directly ending the de facto push for mass EV adoption.

The scale of Musk's political influence is undeniable. He was the largest political donor in the 2024 cycle, contributing more than $291 million to Republican candidates and causes. This financial support was pivotal, with Musk himself claiming "Without me, Trump would have lost the election." This massive infusion of capital into the Republican Party and Trump's campaign creates the factual basis for the claim that Musk's influence helped enable the policy shift that now threatens the EV transition.

The Structural Shift in Global EV Demand

The deceleration of the global EV transition is not a U.S.-specific policy outcome but a broad, multi-faceted market reassessment. At its core is a fundamental shift in consumer preference. According to a recent report, half of all car buyers worldwide now plan to purchase a new or used gasoline-powered vehicle. This represents a decisive pivot, with interest in fully electric cars dropping by 10 percentage points and hybrid demand also softening. The message is clear: practicality, affordability, and choice are outweighing political or environmental mandates for a growing segment of the market. This consumer retreat is translating directly into slower market growth. BloombergNEF projects that growth in global sales of electric vehicles is expected to slow this year, with sales increasing by only 12% from 2025. That marks a significant deceleration from the 23% growth seen last year. The slowdown is a global phenomenon, driven by a confluence of factors beyond any single administration's rules. In Europe, the planned 2035 ban on internal combustion engines faces unprecedented political pushback, with six national leaders urging a more flexible approach. In China, the world's largest EV market, the phase-down of government subsidies is tempering demand. Even in the U.S., where the policy rollback is most visible, the trend reflects a broader consumer reassessment of cost and charging practicality.

The bottom line is that the once-linear path toward electrification is encountering structural headwinds. Automakers, governments, and consumers are all recalibrating expectations. The industry's long-held argument for a slower phase-down of fossil fuels is gaining traction as policymakers and buyers alike prioritize realistic solutions over idealized visions. This creates a more complex, competitive landscape where the future of transportation will be defined by a diverse mix of technologies, not a single mandated path.

Tesla's Financial and Strategic Response

Tesla is navigating a period of profound tension between its market valuation and its underlying business trajectory. The stock has defied the fundamentals, rising 11% in 2025 despite the company facing its first-ever year of declining revenue. This disconnect highlights a market betting on a future turnaround, not the current reality. The path to that rebound is now explicitly tied to scaling new ventures, not just its core automotive business.

A key strategic pivot is the company's move to offer its Full Self-Driving (FSD) software as a subscription service. This shift, announced by Musk, is framed as a way to increase adoption and avoid potential litigation. Yet, it has drawn criticism for accelerating the commoditization of what was once a key technological moat. Investor Ross Gerber argued this is "the first step" for the automaker towards "giving away the software", warning that Tesla's "technology edge... is fading" as competitors catch up. The subscription model, while potentially boosting recurring revenue, may signal a retreat from the premium pricing power associated with proprietary software.

The projected improvement in profitability for 2026, which analysts expect to see with a 32% increase to $2.17 a share, hinges on this diversification. Growth is not expected to come from the flagship Model 3 and Model Y, which are heavily reliant on the now-expired U.S. tax credit and face intense competition. Instead, the rebound will depend on scaling Tesla's energy business and, more crucially, its new ventures in AI and robotics. The company's push into consumer robotics and the potential rollout of a robotaxi service are the long-term bets that could finally justify the stock's premium. For now, the market is looking past a year of contraction, placing its faith in a future where these new engines of growth take hold.

Forward-Looking Catalysts and Risks

The validity of the causal link between Musk's political influence and the EV rollback, and its investment implications, will hinge on a few critical catalysts and risks. The first is the market response in key regions. The rollback in the U.S. is part of a broader global trend, but the resilience of demand in China and Europe will be a key test. In China, where consumers are less concerned with how their cars are powered and more focused on digital features, the subsidy phase-down is already tempering growth. In Europe, the planned 2035 ban faces unprecedented political pushback. Watch for whether these markets see a sustained rebound in EV adoption or further policy reversals, which would signal the U.S. shift is an isolated event or the start of a global retreat.

A second major risk is regulatory pushback. The Trump administration's justification for the rollback centers on consumer cost and legal constraints. If the policy leads to significant consumer backlash over higher fuel prices or if environmental concerns intensify, it could invite legal challenges or political pressure for a reversal. The White House itself frames the Biden standards as "costly and unlawful" and an "EV mandate" that consumers didn't ask for. Any evidence that the rollback fails to deliver promised savings or that EV adoption stalls could undermine this narrative and create policy volatility.

Most critically for Tesla investors, the company's path to de-risking the investment depends entirely on its ability to monetize beyond the core automotive business. The stock's resilience despite declining revenue underscores a bet on future growth engines. The planned shift to a Full Self-Driving subscription model is a pivotal test. As investor Ross Gerber warns, this move risks "giving away the software" and signals a fading technology edge. Success here is not just about new revenue streams; it's about proving Tesla can build a durable, high-margin software and AI platform that can offset the structural challenges in the EV growth story. The market is looking past a year of contraction, but it will demand clear progress on this front to justify the premium.

The bottom line is that the investment thesis is now bifurcated. One path is the legacy EV story, which faces headwinds from policy, consumer preference, and competition. The other is a bet on Tesla's ability to become a software and robotics company, a transition that is both its greatest opportunity and its most significant execution risk. The coming year will be defined by which narrative gains traction.