Elon Musk Sparks Stock Plunge Over Trump Clash \ Newslooks \ Washington DC \ Mary Sidiqi \ Evening Edition \ Tesla shares fell 7% after Elon Musk reignited tensions with Donald Trump. Musk’s formation of a third party and criticism of a GOP bill sparked political backlash. Investors are increasingly concerned about future risks to Musk’s companies amid federal subsidies.
Quick Looks
- Tesla shares fell 7% Monday amid renewed Musk-Trump conflict.
- Musk criticized a GOP spending bill, forming a third party.
- Trump accused Musk of having “gone off the rails.”
- Investors worry about political retaliation affecting Tesla and SpaceX.
- Analyst warns ongoing feud may hurt Musk’s ventures long-term.
- Tesla sales dropped 13% in Q1 and Q2 of 2025.
- Musk’s politics are seen as hurting Tesla’s brand appeal.
- Chinese EV makers like BYD increase competitive pressure globally.
- Tesla stock has plunged about 40% from its December peak.
Deep Look
Tesla shares fell sharply on Monday, dropping 7% in a single day, as the escalating feud between CEO Elon Musk and President Donald Trump triggered deep concerns among investors. The decline highlights mounting fears that Musk’s increasingly political behavior — and his challenge to the current administration — could have serious consequences for Tesla and his other businesses, all of which operate under heavy federal oversight.
Over the weekend, Musk publicly announced the formation of a new third political party, presenting it as a direct response to President Trump’s recently approved GOP-led federal spending bill. Musk slammed the legislation as deeply harmful to innovation, arguing that it stifles economic growth, restricts support for emerging technologies, and threatens to kill jobs across industries like electric vehicles (EVs), clean energy, and artificial intelligence. The public nature of Musk’s rebellion — against a president he once supported — has caused ripples across both political and financial communities.
President Trump, never one to back down from a public confrontation, responded harshly on his Truth Social platform, claiming Musk had “gone off the rails.” The President’s criticism of Musk signals not just personal disappointment but potentially policy implications, particularly as Musk’s companies — Tesla, SpaceX, and social media platform X — remain heavily reliant on federal funding, tax incentives, and regulatory partnerships.
Tesla, in particular, has benefited significantly from clean energy subsidies, tax credits for EV buyers, and federal grants. A deterioration in the relationship between Musk and the Trump administration could jeopardize Tesla’s access to these programs or delay approvals for key projects. This threat has become a primary concern on Wall Street.
Wedbush Securities analyst Dan Ives issued a stark warning in a memo to investors late Sunday: “With the autonomous and EV future accelerating, this is a time when Musk should be locking in federal partnerships — not launching political crusades. Poking the bear in Washington, especially when that bear is the sitting President, is dangerous. Trump has influence over key regulatory agencies and could make life extremely difficult for Tesla, SpaceX, and even X in the next two years.”
Musk’s political pivot marks a significant departure from the 2024 presidential election season, when he openly supported Trump and contributed to right-wing campaigns. But in 2025, as Trump assumed office and began rolling out a more conservative budgetary agenda, tensions began to mount. Musk’s concerns about the administration’s approach to federal spending, climate priorities, and innovation incentives eventually spilled into open criticism, culminating in his third-party declaration.
The financial fallout has been swift. Tesla stock, which soared to an all-time high of $479.76 in December 2024, has since lost about 40% of its value. The past week alone saw shares drop by more than $26, closing at $289.75 on Monday. This rapid decline is being interpreted not just as a reaction to political instability but as part of a broader trend of eroding investor confidence in Tesla’s future.
Adding to the pressure is Tesla’s weak sales performance. In the first and second quarters of 2025, the company reported a 13% year-over-year decline in deliveries — a troubling sign given the ongoing global growth in EV adoption. Industry giants like Ford, GM, and Hyundai have reported increased EV sales, thanks in part to steady product rollouts and less polarizing brand identities. Analysts increasingly point to Musk’s highly visible political positioning as a drag on Tesla’s public image and sales, especially among younger and progressive buyers who once formed the core of Tesla’s customer base.
The situation is even more complex overseas. In Europe, Musk’s open support for far-right movements, including Germany’s controversial Alternative für Deutschland (AfD), has generated widespread backlash. Tesla’s Gigafactory Berlin has faced both political and environmental protests, some of which are tied directly to Musk’s affiliations. Consumer trust, once Tesla’s strongest asset, is showing signs of significant erosion in regions where political neutrality is valued.
Meanwhile, Chinese electric vehicle manufacturers like BYD and Great Wall Motor continue to surge. These companies are expanding globally with speed, offering EVs that are competitively priced, built with fast-charging technologies, and tailored to local markets. In segments where Tesla once dominated — including mid-priced SUVs and compact EVs — these Chinese brands are now capturing significant market share.
All of this raises a fundamental question for Tesla: Can it afford the political costs of Elon Musk’s growing activism? While Musk has always styled himself as a disruptive innovator, his foray into active opposition against a sitting president — especially one with control over critical regulatory bodies — could usher in long-term operational challenges.
For shareholders, the uncertainty is severe. Beyond sales and subsidies, there’s a growing perception that Musk’s political ambitions are overshadowing Tesla’s core mission: accelerating the world’s transition to sustainable energy. This mission is now being complicated by headlines dominated not by product innovations or technological breakthroughs, but by political skirmishes.
Unless there’s a shift in strategy — either through Musk stepping back from political commentary or Tesla reinforcing its business focus — the company could face even more headwinds in the months leading to the 2026 midterms. With President Trump firmly back in power and actively shaping the legislative landscape, Tesla’s future may depend less on innovation, and more on diplomacy.
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