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Top One Magazine

How Elon Musk wields his influence in Sacramento

Twitter’s new owner has jousted publicly with California elected officials for years. Yet behind the bluster, Sacramento has shown a lot more love than hate for Elon Musk.

The Musk-Sacramento symbiosis follows a familiar pattern: Musk openly defies one of the most tightly regulated state governments and gets pushback from progressive lawmakers. They score brownie points from their online tussles, while Musk — still flush with state subsidies — emerges with undiminished political capital.

Musk made headlines last year when he shifted Tesla’s headquarters to Texas, saying California’s dysfunction drove him out of state. Democratic Gov. Gavin Newsom responded to the affront by lauding Musk as a “genius” and arguing the billionaire owes some of his success to California.

“It would be interesting to get the facts on how much California has invested in Tesla — the hundreds of millions of tax subsidies we’ve provided that company,” Newsom, who likes to tout his decades-long relationship with Musk, told reporters at an event last fall.

Musk has financially backed California’s ambitious governor, maxing out campaign donations for Newsom’s 2018 run and giving frequently to other Democratic lawmakers. And despite the headline-making nature of the HQ move, Tesla continues to grow its California-based operations.

Here are some of the ways Musk has come out ahead in his Twitter-famous feuds with Sacramento:

1. Tesla and tax credits

Hundreds of millions of dollars in California’s regulatory credits for electric vehicles buoy Tesla’s quarterly earnings, according to Trefis, a financial analysis service.

Tesla can sell the credits it receives from the state for manufacturing electric vehicles to traditional car companies that otherwise wouldn’t be able to comply with the government’s zero-emissions sales rules.

In 2019 and 2020, Tesla’s profitability relied on the credits — although now the company margins would stay plenty healthy without them.

The sheer scale of these benefits has proved a sore point with progressive lawmakers. Former Assemblymember Lorena Gonzalez, a San Diego Democrat, complained when Musk announced his headquarters move to Texas that the billionaire “made $200 billion thanks to subsidies from CA taxpayers.”

Online spats aside, Musk’s subsidies don’t look to be at any risk given California policymakers’ aggressive support for EVs — and their equally aggressive push against fuel-powered vehicles.

2. Labor disputes

Musk’s lack of sympathy for labor unions has made him some enemies in the Legislature. (Last month, he challenged United Auto Workers to hold a vote at his Bay Area factory.)

In 2017, lawmakers tied California’s regulatory credits to the state’s evolving labor practice standards in a budget bill widely seen as targeting Tesla. The legislation required California’s labor secretary to “first certify manufacturers as fair and responsible in the treatment of their workers before their vehicles are included in any rebate program funded with state funds.”

That effort fizzled. The state never adopted the relevant regulations to enforce that measure, according to California’s Air Resources Board, nor did it set any standard to certify Tesla’s or any other EV maker’s labor practices as fair. Officials started writing rules in the 2017-2018 fiscal year, but they stopped when the Legislature didn’t extend that tough talk in the next budget bill.

3. Covid orders

California’s strict lockdowns rankled Musk, as they did many business owners. But unlike many businesses up and down the state, Musk openly defied the orders.

Even as the Newsom administration kept schools, restaurants and playgrounds shuttered, the top brass did nothing when Musk flouted his county’s public health orders and reopened his Fremont factory in May 2020 — insulting his local health officer along the way.

And he dared state officials to try to stop him. “I will be on the line with everyone else,” he wrote at the time. “If anyone is arrested, I ask that it only be me.”

4. Auto insurance policy

Tesla has rolled out an auto insurance business in seven states, using driver data to price products — a method known as telematics.

California bans telematics through a 1988 voter-passed ballot initiative, and Musk told investors early this year that he is lobbying for a change. That got the attention of state Insurance Commissioner Ricardo Lara, who came under fire from consumer advocates after a 2019 recording captured him telling insurance executives he was open to revising the prohibition. Lara is up for re-election this year and faces a challenge from a fellow Democrat.

“Yesterday @elonmusk reportedly told investors he’s ‘pushing very hard’ to change the rules on telematics for California drivers,” Lara tweeted in January. “Push all you want, but we won’t bend on protecting consumer data, privacy and fair rates.”

Musk responded bluntly: “You should be voted out of office.”

The issue is still a live one. The advocacy group Consumer Watchdog released a recording of a webcast by Root — a telematics-based insurance company — saying that Lara is “supportive of what we’re doing.”

A spokesperson for the Department of Insurance reiterated Lara’s pledge in a statement saying the commissioner “will not bend on protecting consumer data, privacy, and fair rates.”

5. Down the pike: social media fights

Sacramento is debating a slate of social media bills aimed at combating alleged misinformation and other abuses online that could veer into the type of censorship Musk has cited as his reason for buying Twitter.

Proposals to suspend medical licenses for doctors who post what’s deemed to be Covid misinformation, crack down on “amplification of harmful content” and curb alleged cyberbullying face an uphill climb against industry opposition and legal challenges.

Yet the groundswell of proposals shows where the state’s power players are headed, promising future clashes with Musk’s avowed commitment to unfettered free speech.

Jeremy B. White contributed to this report.

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