The U.S. Government Reportedly Awarded Tesla a $400 Million Contract. It’s Had to Make Some Changes

Tesla CEO Elon Musk has emerged as an important figure in President Donald Trump’s new administration. Musk was actively involved in the election campaign. He’s also become the visible head of the Department of Government Efficiency, which aims to reduce inefficiencies within government institutions.

Since aligning himself with the government, Musk has implemented practices similar to those in his own companies. For instance, he’s enforced long working hours (including sleeping at the office) and eliminated unnecessary costs. As the head of DOGE, he’s also withdrawn protections for career civil servants.

However, as Musk continues to cut what he deems superfluous expenses in government structures, concerns have arisen regarding potential conflicts of interest. These concerns gained traction following a controversial $400 million contract for armored electric cars–specifically, a contract for armored Tesla electric cars.

“Tesla,” the Word That Comes and Goes

Experts often discuss the potential conflict of interest involving Musk and his role within the U.S. government. Much of the focus is on the benefits that might arise from facilitating the testing of self-driving vehicles, which Tesla is banking on. Concerns also point to the potential elimination of incentives for purchasing electric vehicles, which could hinder competitors from closing the sales gap with Tesla.

However, few had considered the possibility of the government purchasing Tesla’s electric vehicles directly for its own use.

In a December 2024 order, the State Department outlined a $400 million contract to procure armored Tesla vehicles as part of the procurement forecast for fiscal year 2025. The same document also mentioned BMW, which currently supplies armored BMW X5 and X7 vehicles for state administrations.

Bloomberg reports that the government has altered the contract to remove Tesla’s mention. This would prevent any potential conflict of interest when awarding the contract. The revised contract now specifies the procurement of $400 million worth of “armored electric vehicles.”

This situation is yet another example of the possible conflicts of interest that could arise from Musk’s new government position. His aerospace company, SpaceX, provides rockets to the military and launches NASA astronauts, and it’s previously secured contracts totaling billions of dollars.

In response, Musk recently said that he has no record of this kind of contract existing. In an X post, the Tesla CEO emphasized that he’s “pretty sure” there has been no approval for the potential purchase of these vehicles.

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Experts wonder how Musk can remain neutral in future contracts involving his companies. In this instance, the $400 million item is the highest among the 320 items listed in the procurement plan for this year, despite other brands being involved.

In statements to Forbes, a State Department spokesperson noted that last year, the Biden administration requested to “explore interest from private companies to produce armored electric vehicles.” However, only one company expressed interest in the contract. The spokesperson also told the outlet that the procurement forecast “should have been a generic entry ‘electric vehicle’” without specifically naming Tesla.

If the contract is awarded, the selected electric vehicle is expected to be the Tesla Cybertruck, which the company has promoted for its durability, even against bullets. The car initially sold well, and the most expensive models were ordered for higher profitability. However, it now appears that the large electric pickup isn’t convincing potential buyers after the first few months on the market.

Image | Austin Ramsey

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