The uneasy alliance between Elon Musk and President Trump exploded on Thursday as the two billionaires clashed publicly over the Republican party’s signature spending bill.

What began as a disagreement quickly escalated into a nuclear-grade war of words. But Tesla stands to lose the most. With its sales plunging globally, emissions regulations rolled back, tariffs already effective and a high-stakes robotaxi launch next week, Musk’s company now finds itself in a vulnerable position. Federal agencies hold the keys to Tesla’s future and Musk may have just picked his most dangerous fight yet.

Welcome to the Friday edition of Critical Materials, your daily round-up of news and events shaping the world of electric cars and technology. Also on our radar today: Car prices have started increasing, but automakers are not blaming tariffs yet, even though tariffs are exactly why prices are rising, to avoid upsetting the White House.

Plus, China’s restrictions on exports of rare earth materials and magnets will severely affect the U.S. car market, regardless of the powertrain type.

30%: Tesla’s Future Hangs In Balance Amid Musk-Trump Clash

Photo by: Andrei Nedelea

Tesla has long depended on the federal government to survive and grow its electric vehicle business.

Back in 2010, the Department of Energy under the Obama administration loaned $465 million to Tesla to build the Fremont factory, which the automaker took over from the General Motors-Toyota NUMMI alliance.

Tesla has also been earning billions in regulatory credit income every year, almost like a side hustle, enabled also by a federal policy. Tesla earns money by selling emissions credits to other automakers that need them to comply with environmental regulations.

The $7,500 consumer credit, as well as the credits for EV manufacturing and charging, have also helped Tesla and the rest of the U.S. auto industry to soften the blow of the capital-intensive transition to EVs. The Republican bill aims to throw initiatives designed to continue growing the EV industry into the woodchipper, which has reportedly upset Musk.

But Musk has reiterated that autonomous cars, not his core passenger vehicle business, will unlock the next phase of growth for Tesla. The automaker is preparing to launch its long-awaited driverless ride-hailing service on June 12 in Austin, Texas. The entire industry will be closely watching the high-stakes rollout, which is exactly why the timing of the Musk-Trump feud is terrible.

 

Some analysts have downplayed the impact of their clash, saying it won’t impact the robotaxi rollout.

“It’s like frenemies in junior high school,” Dan Ives, a senior analyst at financial services firm Wedbush Securities, told Bloomberg TV. “It’s not our view that this changes the regulatory landscape for Musk when it comes to autonomous and the broader vision.”

The Department of Transportation and the National Highway Traffic Safety Administration are in charge of the framework that will determine how self-driving cars start rolling out on public roads. They recently eased the rules and approval processes for autonomous vehicles—a move that would help the likes of Tesla and Waymo, among others. There’s no guarantee that the agencies would make a U-turn on these simpler regulations.

It’s worth noting that streamlining AV regulations was one of the central campaigning topics for Musk as he donated nearly $300 million to Trump’s reelection efforts.

That’s why going from bros to foes with Trump could be a dangerous play by Musk.

60%: Automakers Avoid Blaming Tariffs For Price Increases

Photo by: InsideEVs

When the Trump administration’s 25% tariffs on imported vehicles and foreign-made parts went into effect, automakers tried their best to manage the fear of sudden price increases. Ford and Stellantis even extended employee pricing, whereas Hyundai and Toyota said they were going to hold prices steady.

But automakers can’t entirely absorb the cost of tariffs without passing some of that onto consumers. The impact of that is now slowly surfacing, Rick Wainschel, vice president of data science and analytics at Cloud Theory, told Automotive News. And they are not blaming the price increases on tariffs to avoid upsetting the White House.

Here’s more from that report:

Promotions by Ford, Stellantis and others softened prices for a while, Wainschel said, but prices started to rise again following the Memorial Day weekend. By June 3, the average marketed price exceeded $50,000. By June 5, it was within $50 of the May 3 peak, which was the highest average marketed price since Sept. 7.

“Now manufacturers are starting to raise prices, but they are not doing it in an in-your-face way,” Wainschel said. “Anything perceived as calling out the trade policy as problematic stokes the ire of the White House.” Automakers are leveraging existing price pressures such as model-year changeovers, market dynamics or general inflation, as scapegoats for rising sticker prices.

In simple terms, they’re hiding the real reason for price increases due to the fear of angering the government.

According to that report, prices of the Volvo EX90 electric SUV are expected to increase 4% on the model year 2026 vehicles. The Swedish automaker is blaming that on new tech and “market conditions.” BMW will increase prices by 1.6% due to “inflation” and “new equipment.” And Mercedes-Benz will increase prices by up to 5% for an unspecified reason.

90%: China’s Export Restrictions Also Affect Your Gas Cars

Photo by: Suvrat Kothari

America relies on China to feed its insatiable consumer spending and China counts on the U.S. as a lucrative export market. But in one key arena, the balance of power tips in favor of China: rare earth materials and magnets. Here, China holds the stronger hand and it’s not afraid to play its cards.

China is dominant in the mining and processing of rare earth materials and magnets used in consumer electronics and cars, regardless of the propulsion type. In response to the Trump administration’s tariffs, China has imposed export restrictions on these materials.

Here’s more from Automotive News on just how damaging that can be for cars:

“You’re going to find things at least partially comprised of rare earth metals in not just vehicles, but almost all consumer products,” Sam Abuelsamid, vice president of market research at Telemetry, told Automotive News. “So many components rely on them — solenoids for your engine, solenoids for your power steering. If we can’t get rare earth metals, then we’re in big, big trouble.”

According to AutoForecast Solutions, the chip shortage that happened between 2021 and 2023 reduced automakers’ global output by some 17 million vehicles. The impact of China’s export curbs on rare earth materials is expected to be bigger if no trade deal is reached.

100%: Will the Trump-Musk Divorce Affect EVs And Robotaxis?

Photo by: White House

Having the CEO of the world’s second-largest EV maker as President Trump’s closest advisor should have boosted the case for electric cars. Instead, it seems to have done the opposite and the fallout could drag down the entire EV industry.

The stakes for Tesla are even higher. The company has gone all-in on its robotaxi vision, which Trump could kneecap with a single executive order if he’s in the mood for payback.

Should Musk have been more careful here? And could this online slugfest between two of the world’s most powerful men actually derail next week’s robotaxi launch? Drop your thoughts in the comments.

Have a tip? Contact the author: suvrat.kothari@insideevs.com