Tesla (TSLA) stock plunged Tuesday, shedding more than 7% in early trading amid an escalating political confrontation between CEO Elon Musk and President Donald Trump.
The feud, fueled by threats to eliminate electric vehicle (EV) subsidies and scrutinize federal support for Musk’s companies, is deepening investor unease at a time when Tesla is already grappling with weakening global demand and heightened competition.
White House Threats Rattle Investors
The latest selloff was triggered by President Trump’s scathing remarks on social media and in press appearances, calling into question the billions in government subsidies received by Tesla and other Musk-led ventures like SpaceX. Trump floated the idea of having the Department of Government Efficiency (DOGE)—a group Musk previously helped lead—investigate federal support granted to Musk’s firms, stating: “DOGE is the monster that might have to go back and eat Elon.”
These public threats have injected fresh political risk into Tesla’s business model. The company is a leading beneficiary of EV tax credits and green energy incentives. Analysts estimate that proposed legislation terminating EV tax breaks could slash Tesla’s annual profits by over $1 billion. JPMorgan analysts noted that as much as 40% of Tesla's bottom line could be vulnerable if regulatory support is withdrawn.
Trump’s attacks followed Musk’s fierce criticism of a sprawling tax-and-spending bill championed by the White House. Musk labeled the bill “utterly insane and destructive,” accusing it of bolstering legacy industries at the expense of emerging sectors like EVs and AI.
Europe Sales Slide, Q2 Deliveries in Focus
The war of words is unfolding against a backdrop of deteriorating demand for Tesla vehicles. In Europe, Tesla registrations have dropped for five straight months, with June sales plunging over 60% in Sweden and Denmark. Through May, Tesla's European sales are down more than 37% year-over-year. Similar softness is evident in the U.S., where April EV registrations declined 16%, ceding ground to rivals like GM’s Chevrolet and Ford.
Analysts expect the second quarter to show continued weakness. Tesla is forecast to report around 395,000 global deliveries—down roughly 11% year-over-year—when it releases results Wednesday. That would follow a disappointing first quarter, which saw Tesla’s worst delivery performance since mid-2022.
The pressure has intensified following the departure of Omead Afshar, a longtime Musk confidant, who had overseen sales operations in North America and Europe. Musk has reportedly taken direct control of those functions, a move that underscores the seriousness of the slowdown.
Musk’s Political Gamble Adds to TSLA Volatility
The political drama is also overshadowing Tesla’s recent efforts to reignite growth. While the June debut of its robotaxi service in Austin had sparked a brief stock rally, optimism has since faded. Reports of erratic behavior, including phantom braking, have drawn scrutiny from regulators, potentially delaying broader rollout.
Meanwhile, Tesla’s future lineup—including a long-awaited affordable model and refreshed versions of its top sellers—remains delayed. With EV demand softening and competitors offering cheaper alternatives, the company’s market share is under pressure.
Investors are reacting not only to weakening fundamentals but to Musk’s increasingly polarizing public persona. The CEO’s renewed threats to create a political party, coupled with provocative social media activity, have raised questions about his focus. Tesla’s high valuation—trading at more than 160 times forward earnings—leaves little margin for error.
Conclusion
The combination of political volatility, declining sales, and leadership churn has disrupted Tesla’s rebound. Once buoyed by hopes of AI-driven growth, the stock is now facing a new reality where shifting policies and uncertain demand weigh heavily on sentiment. With Q2 delivery results imminent and no signs of a truce in the Trump-Musk feud, investors are bracing for more turbulence ahead.
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