Tesla stock took a major hit after CEO Elon Musk revealed plans to launch a new political party, triggering a harsh reaction from former ally and US President Donald Trump. The Tesla stock dropped by 7.6% in premarket trading Monday, marking its steepest decline since early June.
Trump Labels Musk a “Train Wreck”
Trump took to Truth Social late Sunday, calling Musk “off the rails” and describing his political move as “ridiculous” and disruptive. Ahead of boarding Air Force One, he warned that Musk’s idea would only create “total chaos.”
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Investor Concerns Deepen
Market experts say investors are worried Musk is once again distracted. Neil Wilson of Saxo Markets noted that tensions with Trump could jeopardize federal EV subsidies. “Investors had welcomed Musk stepping back from politics, but now fear he’s getting pulled back in,” Wilson said.
Political Fallout and Feud
The Musk-Trump clash began in June after Musk criticized Trump’s “Big, Beautiful Bill,” arguing it would inflate the federal deficit. On Saturday, Musk declared the formation of the “America Party” to challenge both Republicans and Democrats, calling the current system corrupt and undemocratic.
In response, Trump dismissed third parties as failures that only spread “disruption and chaos.”
Weak Sales and Rising Competition
Tesla is also battling business setbacks. Last week, it reported a 13.5% drop in Q2 vehicle sales compared to the same period last year. 2024 marked Tesla’s first annual decline in sales since going public. Analysts now expect Chinese automaker BYD to surpass Tesla in global EV sales, despite not operating in the US market.
Musk’s Political Role Draws Scrutiny
Musk’s brief stint as head of the Department of Government Efficiency earlier this year led to mass federal layoffs and sparked protests at Tesla showrooms. In May, he stepped down from his government role, raising hopes he would refocus on Tesla, SpaceX, and X. However, his political ambitions appear far from over.
Tesla shares, once boosted by Trump-Musk alignment, have now fallen over 30% from their December peak.
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