Tesla Shares Drop Amid Political Tensions
Tesla’s stock took a significant hit on Thursday after Elon Musk criticized the Trump administration’s tax cut package, leading to a tense backlash with President Trump. Consequently, the company’s market valuation dropped by $180 billion.
The shares fell over 14%, marking the most drastic one-day decrease this year, and they’ve plummeted 33% since the beginning of the year. Musk’s remarks, referring to the tax law as “Big Beautiful Bill” and “Nice hateful,” were aimed at the GOP’s central domestic policy initiative.
The new legislation abolishes the federal government’s $7,500 tax credit for electric vehicles. Musk condemned this move, suggesting it undermines clean energy incentives. However, Trump countered that Musk had previously not voiced any concerns and shifted his stance only after learning about the credit’s removal.
From the Oval Office, Trump remarked that Musk was well aware of the bill and that “it was no problem.” He later tweeted, “The easiest way to save money on your budget is to terminate Elon’s government subsidies and contracts.”
Musk replied on X, claiming, “Falsely, this bill was never presented to me, and no one in Congress could even read it!” He also highlighted his contributions to Trump’s reelection.
Investor Anxiety Grows
Frustrations are mounting even among Musk’s loyal supporters. Ross Gerber, a notable Tesla investor, expressed concern, saying, “It’s astonishing; he’s now attacking all the people he’s supported. This should benefit Tesla.” His statement reflects growing apprehension about Musk’s involvement in partisan politics, which could harm Tesla’s image and alienate potential allies in Washington.
Dan Ives from Wedbush Securities noted to CNBC that the drop in stock is not just about tax credits. He argued that this type of conflict between Musk and Trump is concerning for Tesla shareholders.
More Than Tax Credits
While Tesla isn’t heavily dependent on federal contracts, Musk’s broader ventures are. SpaceX has a $4.5 billion contract with NASA and plays a crucial role as a launch provider for the U.S. military. Analysts suggest that losing the EV tax credit could cost Tesla around $1.2 billion annually.
Additionally, Tesla is experiencing declining sales in important markets such as California, Europe, and China. Movements like “Tesla Takedown” are gaining attention, and Musk’s political struggles have forced him to navigate between progressive voices and the potential support from Trump’s conservatives. What was once viewed as an innovative, bipartisan initiative now seems increasingly divided.
Cost of the Dispute
Musk’s criticisms have won him some supporters among right-leaning deficit hawks but have also raised concerns about his decision-making. Former allies in Washington now describe him as unstable and hard to work with. The impacts of Musk’s actions are echoing in the boardroom, affecting Tesla’s standing.
Although Musk remains the world’s richest person, his recent losses amounted to $21 billion in personal wealth. This rapid market reaction serves as a stark reminder that political capital, while significant, can be perilous.
