Elon Musk, the CEO of Tesla and a close associate of former President Trump, has intensified his critique of the administration’s new tax legislation, drawing the attention of investors.
In a day with no major announcements from Tesla, the company’s shares dropped over 5%. Traders are speculating that Musk’s sharp comments hint at rising tensions in relationships that have historically been beneficial for his business ventures.
On Thursday, Trump remarked that Musk was upset because the legislation would adversely affect electric vehicle orders.
“Elon and I had a great relationship. I’m not sure what’s going to happen moving forward,” the former president stated.
He expressed disappointment, noting that Musk had previously spoken highly of him personally.
The fallout from Trump’s remarks has contributed to Tesla’s stock decline.
The billionaire, a significant player in the Department of Government Efficiency (DOGE) cost-cutting initiative, criticized the new bill after announcing he would spend less time in Washington and focus more on his companies.
On his social media platform X, Musk urged Congress to eliminate the law, labeling it “nasty hatred.”
As a major Republican donor for the 2024 election, Musk hinted on X that the bill undermines achievements by the DOGE team that came at great personal expense.
His involvement with DOGE and the Trump administration has led to a downturn in Tesla sales, particularly in key markets like Europe, China, and California.
In recent weeks, Musk has gradually distanced himself from the White House amid unrest surrounding Tesla.
“Elon’s political stance seems to be affecting stock performance negatively. First, he ruffles feathers with Trump, likely alienating some Democratic customers, and now he seems at odds with the Trump administration,” noted Tesla shareholder Dennis Dick, who is the chief strategist at a stock trading network.
Musk’s other companies, SpaceX and Starlink, continue to excel but are also facing scrutiny regarding their ties to Trump.
These companies hold strong positions in commercial launch services and satellite internet, with foreign governments finding solace in Starlink due to regulatory ease attributed to Musk’s connections.
Since May 27, Tesla’s shares have dropped 12%, which coincides with Musk’s retreat from political engagement.
The stock has exhibited wild fluctuations since Musk’s endorsement of Trump’s re-election campaign in mid-July 2024—soaring 169% until mid-December, only to see a 54% decline by early April due to intensified protests against Tesla.
The House’s budget proposal primarily targets the popular $7,500 electric vehicle tax credit, set to phase out by the end of 2025—something Tesla and many automakers have relied on to boost demand. Trump has vowed to eliminate these subsidies.
Analysts from JPMorgan have warned that Tesla could lose up to $1.2 billion in annual profits if separate Senate measures affect California’s electric vehicle sales goals, which could incur an additional $2 billion loss from regulated credit sales.
“This budget proposal poses significant risks for Tesla due to the end of EV credits, and Musk’s rift with Trump could be detrimental for Tesla and his other enterprises,” one analyst commented.
Musk’s public criticisms might also alienate Republican buyers of Tesla vehicles. A White House official referred to Musk’s actions as “infuriating.”
This week, Musk engaged with the Senate Republicans regarding budget concerns, arguing that the House bill doesn’t adequately address spending cuts.
Overall, Tesla’s stock has plummeted 22% this year, including Thursday’s losses. Even so, it remains the most valuable automaker globally, boasting a market value of $1 trillion, significantly outpacing Toyota Motor, which stands around $290 billion. Tesla is currently trading at a profit estimate of 140.21 times, a considerable premium compared to other major tech stocks like Nvidia.
