Tesla shares tumbled 14 per cent on Thursday, erasing about $150 billion in market value, as a public clash between CEO Elon Musk and former President Donald Trump rattled markets and raised concerns about regulatory risks for the electric vehicle maker.
The drop came despite no material news from the company itself. Traders dumped the stock in high volumes after Musk lashed out at Trump over a proposed tax bill that threatens key electric vehicle subsidies. Trump fired back, accusing Musk of being upset over losing government support.
The high-profile spat has raised alarms among investors, who fear it could jeopardise Tesla’s regulatory standing in Washington. Trump has publicly threatened to cancel federal contracts with Musk’s companies, including SpaceX and Tesla, calling his subsidies a waste of taxpayer money.
“Elon’s politics are catching up with the stock,” said Dennis Dick, chief strategist at Stock Trader Network. “He first alienated progressive buyers by aligning with Trump, and now he’s turned against him.”
Musk had become a prominent supporter of Trump during the 2024 campaign, even heading the Department of Government Efficiency (DOGE). But in recent weeks, Musk distanced himself from the administration by slamming Trump’s “big beautiful bill” and warning of its impact on clean energy incentives.
The timing could not be worse for Tesla. EV sales have slowed globally, and Musk is betting the company’s future on a pivot to autonomous vehicles. Tesla is developing a fleet of driverless robotaxis, which would require sign-off from the US Transportation Department.
The agency is already investigating Tesla’s “Full Self-Driving” software following a fatal crash. Meanwhile, the House version of Trump’s budget would phase out the $7,500 EV tax credit by the end of 2025, a blow that J.P. Morgan estimates could cost Tesla $1.2 billion in annual profit, plus another $2 billion from lost regulatory credit sales.
Morningstar analyst Seth Goldstein said Tesla could be at a disadvantage if regulators adopt stricter technical standards. Most competitors use lidar and radar for autonomy, while Tesla relies solely on cameras.
“There is a risk regulators could design requirements that disadvantage Tesla,” Goldstein said. “And with Trump, being on his bad side always carries the risk of retaliation.”
Thursday’s plunge also dented Musk’s personal wealth, which fell by $27 billion to $388 billion, according to Forbes.
Tesla stock had surged 169 per cent from mid-July to mid-December last year, fuelled in part by hopes that Trump’s return to office would favour Musk’s businesses. But it has since lost over half that value amid protests, falling sales in key markets like China and California, and now political volatility.
Despite the turmoil, Tesla remains the world’s most valuable carmaker, with a market capitalisation of about $1 trillion, far ahead of Toyota’s $290 billion. But some investors remain sceptical.
“I’m short Tesla. I don’t understand its valuation or fundamentals,” said Bob Doll, chief investment officer at Crossmark Global Investments. “It’s overhyped.”
Tesla trades at roughly 150 times forward earnings, far above peers like Nvidia or Apple, making it vulnerable to swings in sentiment.
“There was a time when the political winds were at Musk’s back,” said Steve Sosnick, chief strategist at Interactive Brokers. “Now, they have turned into headwinds.”
Tesla stock plunges as Musk-Trump feud spooks investors
