Is This Why Musk Is So Furious?

The United States has a new political party thanks to Elon Musk. As he wrote on X over the weekend:

When it comes to bankrupting our country with waste & graft, we live in a one-party system, not a democracy. Today, the America Party is formed to give you back your freedom.

In case you’ve been living under a rock the last few weeks, Elon Musk – the world’s richest man – and President Donald Trump, arguably the world’s most powerful man, are on the outs… perhaps for good.

Musk argues that it’s the recently signed One Big Beautiful Bill (which I cover here and here). He says it’s filled with an overwhelming amount of spending that undoes all his hard work.

“What the heck was the point of @DOGE if [Trump’s] just going to increase the debt by $5 trillion,” he posted on X.

Others argue that his outrage is just a front. That he’s really furious about the bill phasing out Biden’s $7,500 electric vehicle (“EV”) tax credit at a time when Tesla (TSLA) is struggling.

And if that is the reason, it’s a remarkable about-face. As some readers might remember, Musk called for ending those same tax credits as recently as last December. Then again, Tesla reported close to $26 billion in sales that quarter. Flash forward to the first quarter of 2025, the figure was $19.3 billion… a 25% fall.

I don’t have a dog in this fight.

But for investors, these developments do change the landscape around green energy and EVs: Those industries – by and large – are now on their own.

If You Want an EV, Buy It Before September 30

Unfortunately for Elon Musk and his competitors, EV companies will soon be on their own. Those EV tax credits are set to expire on September 30. So, if you want an EV, you might want to buy it soon.

Source: tesla.com

Tesla has significant brand recognition, and Elon Musk is nothing if not resourceful. If I had to guess, I’d say Tesla will weather the storm okay.

But EVs as a whole have struggled recently… for a few reasons.

They’re expensive to make, expensive to maintain, often difficult to “refuel” and, frankly, most people just don’t want them.

That showed clearly in November 2023, when – despite tax credits and overall federal support of green energy – more than 3,000 auto dealers throughout the U.S. sent an open letter to Biden:

These vehicles are ideal for many people, and we believe their appeal will grow over time. The reality, however, is that electric vehicle demand today is not keeping up with the large influx of BEVs [battery electric vehicles] arriving at our dealerships prompted by the current regulations. BEVs are stacking up on our lots.

That was “even with deep price cuts, manufacturer incentives, and generous government incentives.”

Now, you probably see Teslas on the road often enough, so clearly there is a market for EVs. And Musk’s company ran a 7.2% operating margin in 2024, making it the most profitable EV manufacturer in the world.

China’s BYD came in a not-so-distant second at 6.4%. And Li Auto and Seres, two other Chinese competitors, have been making some money as well.

Then again, the Chinese government throws a lot of money around to manufacturers and buyers alike to make that happen. Without that help, those last three businesses’ futures would be much more debatable.

American Green Energy Is Largely on Its Own

The truth is that even with sizable government help, many clean-energy companies – not just EVs – struggle to gain traction and lock down profits. As Barron’s noted just last week:

Other segments of the [clean energy] industry already faced recession-like conditions. The rooftop solar industry alone has seen several bankruptcies in the past year. The U.S. offshore wind industry has stalled out just as it was getting going, leading several developers to cancel projects.

In their defense, businesses fall apart all the time. And when they’re centered around less-tested and/or less-integrated concepts, they run even higher risks of failure.

To throw them a lifeline, Senator Lisa Murkowski (R-AK) successfully lobbied her colleagues to give green companies an extra year to capture current federal tax credits. She also helped cut out an excise tax on wind and solar material bought in China – an enormous source of cheap goods for those industries.

And so, some insiders breathed a little bit easier.

But they’re still on guard – as well they should be considering what just happened Monday. President Trump signed an executive order, announcing that the federal government was done “[forcing] American taxpayers to subsidize expensive and unreliable energy sources like wind and solar.”

Trump made it very clear he thinks such projects are eyesores. But he also more credibly accused them of undermining national security because of how dependent they are on “supply chains controlled by foreign adversaries.” That’s why he has instructed the Secretary of the Interior to review current regulations to “eliminate any such preferences for wind and solar facilities.”

In which case, Murkowski’s last-minute revisions might end up falling flat.

That’s why I’d be very careful about what green assets you hold in your portfolio right now. We’re not in Biden’s America anymore.

Now, having said that, I’m not giving up on the alternative energy/electrification trend altogether. So long as these businesses can stand on their own two feet, they could make worthy investments.

One company we’ve held in the model portfolio of The Wide Moat Letter since April is NextEra Energy (NEE). The company is most known for its Florida Power and Light utilities subsidiary.

But what few know is that NextEra is the largest producer of renewable energy in the world, as the company is happy to admit:

NextEra’s Electricity Generation by Source

Source: NextEra

More importantly, this is a company that absolutely can stand on its own two feet. It has produced steady earnings for years, as I pointed out in our issue.

Even better, NextEra is a reliable dividend payer and raiser. It yields about 3% as I write and has raised that dividend in the neighborhood of 10% for the past five years. My subscribers have already seen 12% returns in three months, or about 57% annualized.

The renewable energy industry isn’t dead… but it’s largely on its own. For a company like NextEra, that’s not a problem. But I can’t say the same for some other, more speculative names in the space.

Be very careful what you buy in the renewable energy industry going forward.

Regards,

Brad Thomas
Editor, Wide Moat Daily