Is it the end of the Cybertruck? Elon Musk announces factory will shift production

Elon Musk's massive US$474 million political donation failed to sway the 2022 midterm elections, as Democrats regained control of the US Congress. Musk had poured the record-breaking sum into Republican-backed groups, but now faces a divided government keen to scrutinize his business ties and government contracts.

The political shift threatens to complicate operations across Musk's corporate empire, including his ventures from Tesla and SpaceX to xAI, as these companies have become deeply intertwined with both Washington and China. Markets reacted swiftly to the election results, with SpaceX shares falling 4% and Tesla tumbling 5% shortly after the opening bell of Wednesday trading.

SpaceX, as a major defense contractor, is a particular target for congressional oversight. Democrats plan to examine Musk's government contracts and potential conflicts of interest involving SpaceX and Tesla, including allegations of misuse of government data during his tenure at Doge. Musk attempted to downplay the setback on social media, joking about election-interfering "space lasers" not working this time.

The intersection of Musk's defense portfolio and Tesla's extensive reliance on China is a key flashpoint on Capitol Hill. Tesla's Shanghai Gigafactory accounts for over half of the company's global vehicle deliveries, while production elsewhere depends on a network of Chinese suppliers. The company also has significant interest in China's solar manufacturing sector, having negotiated to buy nearly US$3 billion in equipment.

Musk's electoral setback was keenly felt in Texas, the de facto operational nerve centre of his empire. He spent US$224 million in Texas races, nearly half of his midterm war chest, and still lost the gubernatorial contest to Democrat Gina Hinojosa. Hinojosa campaigned on freezing approvals for new data centers until environmental and energy safeguards were established, tapping into frustration over surging electricity bills and water usage.

Despite these challenges, analysts believe Tesla's Chinese production is unlikely to buckle under US congressional pressure. Chinese suppliers play a critical role in Musk's long-term robotics vision, with Tesla engineers having audited Chinese component makers for the company's planned mass production of humanoid robots. The Democratic-controlled Congress may make Shanghai politically more expensive but will not make it less productive.