Tesla shares tumbled as much as 7.6% in premarket trading Monday, following a weekend political clash between CEO Elon Musk and President Donald Trump. Musk's announcement of a new political entity - the "America Party" - and Trump's public rebuke triggered a sharp selloff, wiping billions from Tesla's market capitalization and intensifying investor anxiety over Musk's political distractions.
By 7:48 a.m. ET, Tesla stock (TSLA) was still down 6.5%. The decline added to an already bruising month for the automaker, which is grappling with falling deliveries, rising competition, and deepening geopolitical tensions, particularly in China.
"I'm saddened to watch Elon Musk go completely 'off the rails,' essentially becoming a TRAIN WRECK over the past five weeks," Trump wrote on Truth Social late Sunday. He called the political party plan "ridiculous" and warned it would cause "Complete and Total DISRUPTION & CHAOS."
Ahead of boarding Air Force One in New Jersey, Trump told reporters the move would "sow confusion." The backlash from Trump, once an ally, compounds political headwinds for Musk, who had stepped down from his controversial role as head of the Department of Government Efficiency in May amid protests and labor tensions.
Tesla shares have dropped nearly 23% year-to-date. According to analysts at Wedbush Securities, Musk's re-entry into politics could derail efforts to stabilize the company's core business. "Musk diving deeper into politics and now trying to take on the Beltway establishment is exactly the opposite direction that most Tesla investors want him to take during this crucial period for Tesla," Wedbush analyst Dan Ives posted to X on Sunday.
Neil Wilson, a strategist at Saxo Markets, said in a note Monday that investors are rattled by two concerns: "that further friction between Musk and Trump would lead to additional cuts to US government EV subsidies and that Musk appeared 'distracted.'"
The losses extend beyond shareholders. Since his feud with Trump escalated in early June - following Musk's criticism of Trump's newly signed tax-and-domestic-spending law - the Tesla CEO has personally seen his net worth drop by nearly $20 billion. Tesla investors, collectively, have lost more than $100 billion in value since.
"When it comes to bankrupting our country with waste & graft, we live in a one-party system, not a democracy," Musk said Saturday on X. "Today, the America Party is formed to give you back your freedom."
Trump responded that third parties have "never succeeded in the United States," arguing they only create chaos.
Tesla's operational performance has also deteriorated. Last week, the company reported a 13.5% drop in second-quarter deliveries - its steepest quarterly decline on record. The company also posted a roughly 1% year-over-year decline in annual vehicle sales, marking its first-ever full-year sales contraction since becoming a public company.
