Tesla has redelivered a bombshell of news by losing a $400 million federal contract to supply armored electric vehicles for the U.S. State Department. The move follows increasing worries about possible conflicts of interest related to Tesla founder Elon Musk’s concurrent role as head of the Department of Government Efficiency (DOGE) under President Donald Trump. Here’s what occurred and why it’s significant.
The $400 Million Contract
The State Department had planned to buy $400 million worth of “Armored Tesla” vehicles according to its 2025 procurement forecast. The contract — first cited in a December 2024 public document — did not name a specific Tesla model, but referred to the prospect of the Cybertruck, which Musk has marketed as bulletproof.
But the State Department amended the document after reports emerged of Musk’s double duty in the Trump administration and his ownership of Tesla. A new version, edited on Feb. 12, 2025, eliminated references to Tesla, substituting the generic expression “Armored Electric Vehicles.”
Why Was Tesla Removed?
Tesla has been removed from the contract due to concerns over a conflict of interest. DOGE is led by Musk, who wields great control over federal budgets and contracts. At the same time, he owns several companies — including Tesla and SpaceX — that take in billions of dollars in government contracts.
Critics claim Musk’s role in the Trump administration poses an obvious conflict of interest. So, for instance, Richard Painter, a former White House ethics lawyer, snarkily said: “This is what they call ‘efficiency?’ ” Others, including the attorney Tristan Snell, accused Musk of shutting down government agencies while obtaining lucrative contracts for his own companies.
DOGE is honest about what it does, Musk has clapped back. “Transparency enhances trust,” he said at a White House news conference. “You can see: Am I doing something that benefits one of my companies or not?…I certainly expect there to be scrutiny”.
The Role of DOGE
Musk, who created the Department of Government Efficiency to reduce costs and eliminate waste in federal agencies, personally led the effort to scrutinize more than 240,000 entries in the federal taxpayer registry. But critics have said DOGE has been weaponized against agencies investigating Musk’s companies, including, the Consumer Financial Protection Bureau (CFPB) and the National Labor Relations Board (NLRB).
And at the same time, Musk’s companies are still receiving billions in government contracts. SpaceX, for example, recently won a $39 million NASA contract, prompting new questions about fairness and oversight.
What’s Next for Tesla?
Though Tesla has lost the $400 million contract, the company continues to be a major player in the electric vehicle market. The State Department’s updated procurement outlook retains a $400 million line item for “Armored Electric Vehicles,” meaning there’s still an opportunity for Tesla to go after the contract in a more transparent process.
Still, the controversy has tarnished Tesla’s reputation and sparked questions about Musk’s ability to juggle his duties in government and business. And as one critic writes, “Musk sold MAGA that he’s fighting to save taxpayer dollars. And in the meantime, he’s poised to win a $400 million contract.
Broader Implications
This story underscores the difficulty in policing conflicts of interest in government contracting. Although Musk and Trump have sought to dismiss concerns, experts in ethics warn that self-regulation is insufficient. “If there is a conflict, we’re not going to let him get in there,” Trump said at a news conference. But critics say it’s hard to guarantee fairness with Musk exerting so much influence over DOGE.
The controversy adds urgency to calls for greater transparency in government procurement. As Musk himself admitted, scrutiny is crucial for preserving public trust.
Conclusion
Tesla losing the $400 million federal contract is a major blow to the company and a case study of complications surrounding Elon Musk’s dual realities of business and government. The decision by the State Department, while reflective of the concerns over possible conflicts of interest, also leaves the door open for a more transparent and competitive procurement process.
