Aug 12 (Reuters) - When Elon Musk endorsed Donald Trump

for president last month, the Tesla founder and chief executive

backed a candidate who vows to "drill, baby, drill," "end the

electric vehicle mandate" and reduce subsidies of the sort that

helped Tesla become the U.S.'s dominant EV manufacturer.

So instrumental have government loans, tax breaks and other

EV policies been to Tesla's fast growth that despite Musk's

gradual embrace of the former president and his Republican Party

rhetoric in recent years, the company continues to lobby the

U.S. and state governments for benefits championed by the

Democratic Party.

In February, for instance, Tesla in a filing with the U.S.

Environmental Protection Agency, or EPA, urged the Biden

administration to allow California to pursue stricter vehicle

emissions rules than the rest of the country - an idea Trump

opposes.

Months earlier, in a previous filing with the agency, Tesla

lobbied the government for regulations that would ban the

production of most new gasoline cars by 2035 - the so-called "EV

mandate" that Trump and others on the American right have

criticized.

The disparity is hardly the first time that the billionaire

entrepreneur - himself increasingly dismissive of subsidies -

has sent mixed signals on business and politics.

"Elon tends to say he's hostile to subsidies while Tesla is

gobbling them up like a hungry Godzilla," said Mike Murphy, a

Republican strategist who runs the EV Politics Project, a Los

Angeles-based advocacy group that seeks bipartisan support for

electric vehicles.

People familiar with Musk's management at the carmaker told

Reuters his approach to subsidies is pragmatic, a willingness to

accept public money if it's there for the taking. Musk's

willingness to overlook outright Republican opposition to an

industry he helped pioneer, meanwhile, signals a broader focus

on goals that may not dovetail with the immediate interests of

his businesses.

"Tesla is not the endgame for him," said Andrew Ward, a

management professor at Lehigh University, noting Musk's

holdings in sectors ranging from artificial intelligence to

space exploration to neuroscience. Musk could "sacrifice some of

the short-term interest in Tesla," Ward added, "if it'll satisfy

the long-term interests of his ambitions."

Musk and Tesla didn't respond to requests from Reuters for

comment. A spokesman for Trump didn't respond, either. A White

House spokesman declined to comment.

The growing bond between Trump and Musk could be on display

Monday night, when the Tesla boss is scheduled to interview the

Republican candidate on X, Musk's social media platform.

It's unclear exactly what ambitions Musk could seek to

advance through his increasingly vocal rejection of progressive

platforms - from EV subsidies to identity politics.

His support for Trump, once tenuous, solidified in July,

when Musk, after the failed assassination attempt against the

former president, endorsed Trump and said he would fund a

political action committee that federal records show has spent

$21 million to support him and oppose the Democratic ticket.

Days after the endorsement, one user on X asked Musk if he

would comment on Trump's views on EVs. "It will be fine," Musk

responded.

Whatever Musk's endgame, the public record clearly shows

that Tesla, since its founding over two decades ago, has

benefitted from government assistance, largely because of its

role in moving the U.S. toward cleaner cars. Tesla's first major

manufacturing facility, in Fremont, California, was developed

with the help of a $465 million loan from the U.S. Department of

Energy, repaid three years later.

More recently, Tesla has reaped almost $9 billion since 2018

by selling what are known as "regulatory credits," securities

filings show. The credits, awarded in the U.S. by the federal

and state governments to manufacturers who surpass increasingly

strict emissions rules, can be sold to other carmakers who are

unable to comply.

"There was no Tesla without California's regulatory bodies,"

California Governor Gavin Newsom said at a 2022 conference,

citing the importance of the state's credits to the carmaker's

finances.

A Reuters review of Congressional lobbying records - and

Tesla's public comments to federal and state regulators - shows

that the company has continued working to shape public policy in

favor of such benefits.

Earlier this year, in a February filing with the U.S.

Department of the Treasury, Tesla said that sustained government

support, by accelerating the transition away from fossil fuels,

would "mitigate greenhouse gas emissions, and protect the

country's public health and welfare."

"A SENSIBLE PERSON"

Musk once criticized Trump for dismissing the challenge of

climate change.

In June 2017, five months into Trump's presidency, Musk quit

White House advisory panels because the administration withdrew

from the Paris Agreement, a landmark 2016 treaty meant to tackle

climate issues globally. "Climate change is real," Musk wrote at

the time. "Leaving Paris is not good for America or the world."

After Trump lost his 2020 reelection bid, Musk told Fortune

magazine he was "super fired up" about President Joe Biden's

climate-change agenda and optimistic "about the future of

sustainable energy."

Musk soon soured, though, angry that the White House, in a

well-documented episode, didn't invite Tesla to a 2021 gathering

of EV makers. By December of that year, Musk distanced himself

from Biden's initiatives and criticized plans for what would

eventually become the Inflation Reduction Act, or IRA, a major

economic stimulus package built in part upon subsidies for clean

energy.

"I would just can this whole bill," Musk told the Wall

Street Journal then, saying Tesla didn't need public money.

Since the law passed in August 2022, however, Tesla has sung

a different tune. In formal comments to the Treasury and the

Internal Revenue Service, the company praised the law and said

it would seek "continuing engagement...to ensure these benefits of

the IRA are fully realized."

Among other benefits under the law, EV buyers can get

subsidies of up to $7,500 per vehicle if purchasers meet certain

income requirements. Tesla has said that tax credits laid out in

the law for battery manufacturing could generate as much as $250

million for the company per quarter. Musk himself, in a

conference call last year, said the incentives "could be

gigantic."

Other formal comments with various federal agencies have

continued to seek government help. A July 2023 filing with the

EPA appealed to sympathy for the downtrodden: Tesla lobbied the

agency for stricter emissions limits to improve "poor air

quality in many urban areas, including areas with vulnerable

populations."

For Tesla, emissions controls aren't just about the

environment.

By raising demand for regulatory credits among manufacturers

of less efficient vehicles, stricter limits help Tesla continue

to earn billions of dollars through sales of those credits to

rivals, like General Motors ( GM ) and Stellantis ( STLA ). In the last quarter

alone, sales of the credits generated $890 million for Tesla,

according to a July securities filing. The company reported net

income that quarter of $1.5 billion.

In an email, GM said it purchases such credits to keep up

with changing market and regulatory conditions. Stellantis ( STLA )

didn't respond to requests for comment.

Trump has opposed stricter emissions rules and criticized

subsidies for EV manufacturers. Shortly after endorsing the

former president, Musk echoed the sentiment. "Take away the

subsidies," he wrote on social media, a week before Tesla

reported its $890 million credit windfall. "It will only help

Tesla."

Some shareholders have disagreed. Ross Gerber, an outspoken

investor whose firm as of the first quarter owned a roughly $58

million stake in the carmaker, told Reuters that Musk's support

for the former president "is 100% contrary to his own personal

financial interests" and those of "one of the most important

companies for clean energy, which is Tesla."

In interviews, three former Tesla employees who worked on

the company's public policy efforts told Reuters that what some

see as contradiction is more of a tussle between ideology and

pragmatism. As a proponent of free markets, they said, Musk is

by nature opposed to most government intervention. If free money

or other benefits become available, though, Tesla would be

foolish not to take advantage of them.

"He's a very sensible person," one of the former employees

said.

Still, Tesla's most recent lobbying efforts contradict

Trump's discourse, like his repeated calls to "end the electric

vehicle mandate." Although no such mandate exists, the Biden

administration and states including California have sought to

encourage a gradual phaseout of the production of vehicles that

run on fossil fuels.

In its July 2023 filing with the EPA, Tesla called outright

for an end to the manufacture of gasoline cars, calling the

measure "essential" to address the "rapidly escalating climate

crisis." Musk, for his part, has grown circumspect, writing on

social media in June: "Climate change risk is overstated in the

near-term, but probably accurate in the long-term."

The dissonance isn't limited to Musk's environmental views.

In a May 2022 filing with the California Air Resources

Board, that state's emissions regulator, Tesla touted itself as

"a leader in creating a diverse and inclusive workplace." Many

of its employees, it said, hail "from communities that have long

struggled to break through the historic roadblocks to equal

opportunity." It wrote that "communities of color

disproportionately bear the impacts of air pollution."

The filing came just days after Musk, increasingly

disdainful of identity politics, made clear in a social media

post that he could no longer support Democratic candidates.

Democrats, he wrote at the time, are "the party of division &

hate."

In the weeks since Vice President Kamala Harris succeeded

Biden as the party's candidate for the White House, Musk has

made his distaste for her bid clear. Last week, after an X user

posted a video montage of Harris speaking about "equity" and

"equality," Musk replied: "Kamala is quite literally a

communist."

Joseph Costello, a Harris campaign spokesperson, in a

statement said: "Trump is bought and paid for by extremist,

anti-worker billionaires, and Elon knows that Trump will give

him reckless tax handouts at the expense of the middle class."

(Additional reporting by Hyunjoo Jin. Editing by Brian Thevenot

and Paulo Prada.)