Tesla shares plunged over 7% on Monday following CEO Elon Musk’s announcement that he would launch a new U.S. political party, coined the “America Party,” amid renewed tensions with former President Donald Trump and concerns over the loss of EV tax credits.
The stock decline reflects growing investor anxiety that Musk’s deep dive into politics comes at a critical juncture for Tesla. Sales have dipped, deliveries have fallen for two consecutive quarters, and heightened competition is narrowing market share.
Analysts were quick to express concern. Dan Ives of Wedbush Securities warned, “Very simply, Musk diving deeper into politics and now trying to take on the Beltway establishment is exactly the opposite direction that Tesla investors/shareholders want him to take during this crucial period for the Tesla story.” Echoing this sentiment, Shawn Campbell of Camelthorn Investments said, “I and every other Tesla investor would prefer to be out of the business of politics. The sooner this distraction can be removed and Tesla gets back to actual business, the better.”
The conflict has also been inflamed by Trump’s “Big Beautiful Bill,” which eliminated the $7,500 federal EV tax credit and regulatory credits—sectors of significant revenue for Tesla. William Blair analysts noted investors are “growing tired of the distraction… and only see downside from his dip back into politics.” The regulatory credit losses alone could amount to more than $2 billion.
Short sellers also benefited, raking in an estimated $1.4 billion from the stock’s decline. Reuters reported Tesla shares sank nearly 8% on Monday as Musk’s political pivot “sparked renewed concerns over his dedication to the company.”
Musk’s feud with Trump has escalated since he broke from the Republican establishment by criticizing the spending bill and forming a new political entity. Trump countered sharply, calling the move “ridiculous” and threatening to revoke subsidies to Musk’s companies.
For Tesla’s board, this development raises critical questions of governance. Critics argue Musk’s divided focus could hamper operational execution. As Reuters noted, the board “faces a dilemma managing him as he oversees five other companies and his personal political ambitions.”
This episode underscores the delicate balance Musk must strike between his political ambitions and leadership of Tesla. With mounting pressure from analysts and investors alike, the company’s future trajectory—and Musk’s role in shaping it—hangs in the balance.
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