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Tesla shares tumbled after the electric-car maker’s chief executive Elon Musk said he would form a new political party, escalating a feud with US President Donald Trump that could imperil the billionaire’s business empire.
Shares in Tesla were down 7.4 per cent during Monday trading on Wall Street, taking its decline to about 18 per cent over the past five weeks, as Musk has repeatedly clashed with Trump.
A return to political activism is contrary to what Musk promised shareholders in late April, when he said he would be “allocating far more of my time to Tesla” to help arrest a plunge in electric vehicle sales.
Tesla’s sales slump has been partly caused by consumer distaste at Musk championing rightwing causes around the world.
Daniel Ives, an analyst at Wedbush, said Musk’s apparent decision to “dive deeper into politics . . . is exactly the opposite direction that Tesla investors [and] shareholders want him to take during this crucial period for the Tesla story”.
Musk left the Trump administration in late May when his time as a “special government employee” with the so-called Department of Government Efficiency (Doge) came to an end. The departure came as the pair fell out over the president’s signature tax and spending bill, which Trump calls the “big, beautiful bill”.
Tesla’s market capitalisation has dropped more than $230bn since Musk left the administration to about $915bn on Monday. The carmaker’s valuation is down from a peak in mid-December of more than $1.5tn.
In his latest broadside against Trump, Musk over the July 4 holiday weekend announced he would form a new political party, which he said was needed to combat the “one-party system” undermining US democracy.
Trump hit out at the billionaire’s plans for a new party, writing on his Truth Social platform that he was “saddened to watch Elon Musk go completely ‘off the rails’ essentially becoming a TRAIN WRECK over the past five weeks”.
The public feud marks a spectacular unravelling of the previously close ties between the two that were forged when the world’s richest man helped bankroll Trump’s return to the White House.
Trump then installed Musk, who also runs SpaceX, as head of Doge and gave him the job of finding trillions of dollars of savings across government.
Tesla’s shares surged after Trump’s victory as investors bet that Musk’s closeness to the administration would benefit his businesses.
However, Musk was unable to use his influence to get the president to reverse his position on electric vehicles and renewable energy, both of which are heavily penalised in Trump’s “big, beautiful bill”.
Tesla stands to lose billions in revenue from selling regulatory emissions credits to rivals after the bill axed fines on carmakers that build more polluting petrol vehicles. A $7,500 federal tax credit for certain EV purchases and leases will be removed at the end of September.
Trump has blamed ending EV-friendly policies for Musk’s strident opposition to the bill. In June, he said “I took away his EV Mandate that forced everyone to buy Electric Cars that nobody else wanted (that he knew for months I was going to do!), and he just went CRAZY!”
Jed Dorsheimer, analyst at William Blair, said more than $2bn in profit from regulatory credit sales was threatened by the bill — which Trump signed into law last Friday.
“We also expect that investors are growing tired of the distraction . . . and only see downside from his dip back into politics,” Dorsheimer added.
The fallout could spread wider than Tesla. Trump ally Steve Bannon has called for SpaceX to be nationalised and the president has threatened to strip Musk’s rocket and satellite company of its federal contracts.
Trump also said he would “take a look” at deporting Musk to his native South Africa.
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