Tesla Stock Plummets Following Elon Musk’s Political Ambitions
Tesla shares took a nosedive on Monday, dropping by as much as 7.6% in premarket trading and remaining down by about 7% throughout the regular trading session.
What triggered this significant decline was CEO Elon Musk’s surprising announcement of forming a new American political party. The news immediately drew a strong and critical response from US President Donald Trump.
In a post on Truth Social late Sunday, Trump lashed out at Musk, accusing him of going “completely off the rails” and likening him to a “TRAIN WRECK” over the past few weeks, specifically referencing Musk’s announcement of the new political party on Saturday. The president publicly labeled the move as “ridiculous” and predicted it would only lead to “confusion.”
Investor Worries Over Political Distractions and EV Subsidies
Analysts are pointing to two main concerns among Tesla investors. Firstly, there are fears that the escalating tension between Musk and Trump could result in further cuts to US government electric vehicle (EV) subsidies. Secondly, investors are apprehensive that Musk’s newfound political ambitions might cause him to lose focus on Tesla.
Neil Wilson from Saxo Markets noted that investors initially welcomed Musk’s decision to step back from frontline politics, but now they are concerned that he might get “sucked back in” and neglect his responsibilities towards Tesla.
The public feud between Musk and Trump began in early June after Musk criticized Trump’s “Big, Beautiful Bill,” a tax and domestic policy bill that Musk believes will contribute trillions to the federal deficit.
Musk’s announcement of “the America Party” was met with criticism from Trump, who dismissed third parties as historically unsuccessful and creators of “Complete and Total DISRUPTION & CHAOS.”
Tesla’s Challenges Multiply Amid Political Fallout
Monday’s stock performance marked Tesla’s largest single-day loss since early June when the initial clash between Musk and Trump unfolded.
This political turmoil adds to an already challenging period for Tesla. The company recently reported a record 13.5% drop in second-quarter sales compared to the same period in 2024, marking its first annual decline in sales as a public company in 2024.
These figures signify a significant shift for an automaker that was used to consistent growth. Additionally, Tesla is expected to relinquish its title as the world’s largest EV maker to China’s BYD.
Moreover, Musk’s recent involvement in leading the Department of Government Efficiency, which led to widespread layoffs of federal employees, sparked protests outside Tesla showrooms globally.
Although Musk announced his resignation from the government position in May, initially raising hopes among investors for increased focus on his companies, his ongoing feud with Trump and the push for a new political party have once again thrust him into the political limelight.
Tesla shares had surged almost twofold post-election, reaching a record high in mid-December on expectations of a favorable Trump-Musk partnership. However, due to these controversies, the shares have now shed more than a third of their value.
