Musk vs Trump: the political firestorm that’s torching Tesla’s stock

Key points:

• Elon Musk’s feud with Donald Trump has sparked a sharp plunge in Tesla shares, sending the stock down more than 14% and wiping out over USD 140 billion in market value.
  
• Tesla faces potential losses of over USD 1 billion annually if Trump's tax bill becomes law.
• Investors must closely track political risks and upcoming Tesla milestones like the robotaxi launch.

Imagine riding a rollercoaster in pitch darkness—thrilling when climbing high, terrifying when plunging unexpectedly. Tesla investors find themselves strapped in exactly this way, as the electrifying drama between Elon Musk and Donald Trump sends them hurtling downward in spectacular fashion, with Tesla's shares plunging more than 14%.

From policy clash to personal battle

What began as a mere policy disagreement has exploded into an all-out public feud between the billionaire CEO and the US president, rattling markets and wiping more than USD 140 billion off Tesla’s market value in a single day. Musk has openly labelled Trump’s sweeping tax and spending bill—famously dubbed the "one big beautiful bill"—as a "disgusting abomination" that recklessly balloons the federal deficit. Trump’s swift and furious response branded Musk as "crazy" and publicly threatened to rip up billions of dollars worth of crucial federal contracts and subsidies enjoyed by Tesla and SpaceX.

Musk’s recent exit from his brief political advisory role had initially seemed promising for Tesla’s focus on business rather than politics. However, investors now face a grim reality check as the political battle intensifies. The very subsidies and tax credits Trump threatens to axe have long bolstered Tesla’s profit margins. Specifically, the early termination of electric vehicle (EV) tax credits worth up to USD 7,500 per vehicle could slash roughly USD 1.2 billion annually from Tesla’s earnings—a severe blow to profitability that shareholders simply can’t ignore.

“Without me, Trump would have lost the election,” Musk recently jabbed on social media, adding pointedly: “Such ingratitude.” Musk even took the feud to a more personal level, suggesting Trump's name was linked to the controversial Epstein files—a provocative allegation that underscores the deeply personal nature of this escalating dispute.

The conflict has now moved beyond mere words and financial threats, with Musk dramatically escalating matters by announcing that SpaceX will immediately begin phasing out its Dragon spacecraft, a critical vehicle used by NASA to transport astronauts and supplies to the International Space Station. This bold decision underscores how intensely personal disagreements can rapidly spiral into operational disruptions with significant real-world implications.

This kind of rhetoric, colourful though it may be, only deepens investor anxiety. Musk’s audacious style, a magnet for both admiration and scrutiny, has always been a double-edged sword. But Tesla investors are increasingly forced to question whether their CEO’s public brawls are a liability they can afford.

Tesla’s political headache: why investors should worry

The issue isn’t just theoretical: the political volatility is already hitting Tesla’s bottom line. In Germany, a key market, sales fell by a steep 36% in recent data, as some analysts link consumer hesitancy directly to Musk’s increasingly contentious public persona. Investors must now weigh whether Musk’s continued high-profile political skirmishes could jeopardise Tesla’s broader global growth ambitions.

But the risks stretch beyond Tesla’s auto operations. Musk’s ventures, especially SpaceX, rely heavily on US government contracts worth more than USD 20 billion. Trump’s threats, while complex to implement immediately, create a dangerous cloud of uncertainty. Any abrupt reduction in federal funding would send shockwaves not just through Musk’s companies but also across the broader market of government-dependent tech enterprises.