Tesla’s stock took a hit on Thursday, dropping over 5% amid no new company-specific news, as tensions between CEO Elon Musk and former President Donald Trump became increasingly visible. Once a close ally of Trump, Musk has recently turned critical of the president’s sweeping tax legislation, causing investors to speculate about a growing rift that could impact Musk’s sprawling business empire.
Trump responded sharply, suggesting that Musk’s displeasure stems from the removal of the electric vehicle (EV) mandate in the bill. “Elon and I had a great relationship. Not sure if that’s still the case,” Trump said. “He once spoke very highly of me. Now, disappointment sets in, and worse might follow.”
Musk, the world’s richest individual and a central figure in the Department of Government Efficiency (DOGE) cost-cutting initiative, has fiercely condemned the bill, branding it a “disgusting abomination” on his social media platform X. He urged lawmakers to reject the legislation, arguing it undermines the cost savings achieved by DOGE at great personal sacrifice.
The fallout from Musk’s political stance is beginning to show in Tesla’s sales. Markets in Europe, China, and key U.S. states like California have seen a slowdown in EV purchases, even as the overall sector continues to grow. Some analysts note that Musk’s fluctuating political alignments — first backing Trump, which alienated some Democratic-leaning customers, and now criticizing the Trump administration — have unsettled potential buyers.
Tesla shareholder Dennis Dick, chief strategist at Stock Trader Network, said, “Elon’s political moves keep rocking the stock. His initial support for Trump upset many Democratic buyers, and now his attacks on the administration are turning off some Republican supporters.”
Musk’s other ventures, SpaceX and Starlink, continue to dominate their niches but have not escaped scrutiny due to their close links with Trump. These businesses remain go-to choices for commercial space launches and satellite internet deployments, benefiting from regulatory facilitation tied to Musk’s political connections.
Since May 27, Tesla shares have fallen roughly 12%, a decline coinciding with Musk’s withdrawal from Washington politics. The stock has been volatile since Musk’s endorsement of Trump’s 2024 re-election bid in mid-2024, initially soaring 169% before tumbling 54% amid growing protests against Tesla.
A key point of contention in the recent budget legislation is the proposed phase-out of the $7,500 federal EV tax credit by the end of 2025, a benefit Tesla and competitors have long leveraged to boost sales. Trump had promised during the transition to scrap this subsidy. Analysts at J.P. Morgan warn this could slice $1.2 billion off Tesla’s full-year profits, plus an additional $2 billion loss tied to regulatory credit sales affected by Senate legislation targeting California’s EV rules.
“The budget bill spells trouble for Tesla, especially with the end of EV incentives and Musk’s deteriorating relationship with Trump,” said Jed Ellerbroek, portfolio manager at Argent Capital Management.
Musk’s public denouncements have also alienated some Republican Tesla buyers. A White House official described Musk’s recent actions as “infuriating.” Meanwhile, Musk joined Senate Republicans pushing for even deeper spending cuts, criticizing the House bill for not going far enough.
Year-to-date, Tesla shares have dropped 22%, including Thursday’s slump. Despite this, Tesla remains the world’s most valuable automaker by a wide margin, boasting a market capitalization near $1 trillion—well ahead of Toyota’s roughly $290 billion. Tesla trades at an extraordinary 140 times expected profits, far exceeding multiples seen in Big Tech peers like Nvidia.