Tesla stock plunges as Musk’s political party plan sparks Trump clash
Tesla stock (NASDAQ: TSLA) dropped 6.79% on Monday after CEO Elon Musk revealed plans to launch a new American political party, igniting a public feud with former President Donald Trump. Shares fell as much as 7.6% in premarket trading, marking Tesla’s largest single-day loss since early June. According to analytics firm ORTEX, Tesla short sellers made an estimated $1.6 billion in profit during the decline.
Trump took to Truth Social to criticize Musk’s announcement, calling it “ridiculous” and warning it would create “disruption and chaos.” He further stated, “I’m saddened to watch Elon Musk go completely ‘off the rails,’ essentially becoming a train wreck over the past five weeks.”
Market analysts say Tesla investors are worried that the escalating Musk-Trump rivalry could lead to reduced government incentives for electric vehicles and distract Musk from running Tesla. “Investors had cheered Musk stepping back from politics, but now fear he’s losing focus,” noted Neil Wilson of Saxo Markets.
Tesla’s stock drop comes amid mounting challenges for the automaker. The company recently reported a record 13.5% decline in Q2 vehicle sales and its first-ever annual sales decrease. These setbacks, combined with intensifying competition from Chinese EV giant BYD and global protests linked to Musk’s political activity, have put further pressure on the stock.
Musk’s formation of the “America Party” is his response to frustration with both major U.S. political parties, stating on X, “When it comes to bankrupting our country with waste & graft, we live in a one-party system, not a democracy. Today, the America Party is formed to give you back your freedom.”
Previously, Musk had stepped down from a government efficiency role, which had briefly reassured investors he would focus on Tesla and his other ventures like SpaceX. However, renewed political ambitions and clashes with Trump have renewed concerns about leadership distraction and policy risks.
Tesla shares had soared following the last election, fueled by expectations of Trump-Musk cooperation. But since Musk’s political involvement escalated, Tesla’s stock has dropped over a third from its December high, signaling growing investor unease about the company’s direction amid political turmoil.
