Musk’s Political Ambitions Spark Tesla Stock Drop Amidst Trump Feud

Tesla shares experienced a significant decline this week, tumbling by as much as 7.6% in premarket trading Monday, following CEO Elon Musk’s announcement of his intention to form a new American political party. The move drew immediate and sharp criticism from US President Donald Trump, who publicly dismissed Musk as ‘off the rails’ and a ‘train wreck’ on his Truth Social platform late Sunday.

While Tesla stock (TSLA) recovered some ground, it ultimately opened down 7.6% at the start of regular trading. Analysts suggest investor concerns stem from potential further friction between Musk and Trump, which could lead to cuts in US government EV subsidies, and a perception that Musk is becoming increasingly ‘distracted’ by political endeavors. This recent feud reignites a series of public exchanges between the two prominent figures, which began in early June after Musk criticized Trump’s ‘Big, Beautiful Bill’—a major tax and domestic policy bill recently signed into law.

Musk defended his new ‘America Party’ as a means to restore freedom, stating, ‘When it comes to bankrupting our country with waste & graft, we live in a one-party system, not a democracy.’ However, Trump quickly countered, asserting that third parties historically fail and only create ‘Complete and Total DISRUPTION & CHAOS.’ The stock’s performance on Monday mirrored its biggest single-day loss since June 5, a period marked by previous social media spats between Musk and Trump.

Tesla’s market challenges extend beyond political controversies. The company has recently grappled with intensified competition in the EV sector. Last week, it reported a record 13.5% drop in second-quarter sales compared to the same period in 2024, and its first-ever annual sales decline as a public company for 2024. These figures put Tesla on the verge of losing its title as the world’s largest EV maker to China’s BYD. Despite Musk’s resignation from a government position in May, which initially raised investor hopes for increased focus on Tesla, his renewed political engagement continues to cast a shadow over the company’s stock performance.

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