Shares of Tesla fell sharply by 7% on Monday, as tensions between CEO Elon Musk and former President Donald Trump flared up again over the weekend. Musk, once a supporter of Trump and a significant donor, declared he would be starting a new political party in response to a recent Republican spending bill. He criticized the bill, arguing that it would hinder job growth and negatively impact emerging industries.
In a post on social media, Trump remarked that Musk had been “off the rails” recently. Investors are concerned that Musk’s ongoing spat with Trump could jeopardize the federal subsidies his companies rely on.
Dan Ives, an analyst at Wedbush Securities, pointed out that as we look towards an increasingly autonomous future and an ongoing AI revolution, it may not be wise for Musk to provoke Trump further. He warned that if their political conflict escalates, it could create more obstacles for Musk’s companies in upcoming years, especially with the mid-term elections approaching in 2026.
The volatility of Tesla’s shares has been notable since Musk intensified his support for Trump during last year’s election. The company has also experienced a significant backlash related to Musk’s political affiliations. Tesla’s sales dropped by 13% in the first quarter and mirrored that decline in the second quarter, despite the overall rise in electric vehicle sales from competitors, including larger auto manufacturers in Detroit. Analysts suggest that Musk’s association with Trump and far-right groups may be a considerable factor in these dwindling sales.
Additionally, Tesla faces growing competition from global automakers, particularly from Chinese companies like BYD and Great Wall, which are rapidly expanding their markets and offering affordable electric vehicles with advanced battery technology.
Since reaching a peak of $479.76 in December, Tesla shares have decreased by about 40%, falling roughly $26 since last Thursday, bringing the current price to $289.75.
