Tesla stock is reeling amid a market firestorm sparked by a feud between CEO Elon Musk and President Trump.
The clash erupted because of a new government spending bill, triggering market volatility and raising concerns over Tesla’s future as the EV company faces trouble from weak global sales and the removal of the EV tax credit.
What Happened Between Musk and Trump?
The clash between Elon Musk and Donald Trump began over a spending bill passed by the White House.
The bill eliminated EV tax credits, which had helped lower the cost of electric vehicles by allowing buyers to claim a credit on their income taxes. Tesla relies on these EV tax credits for profitability. The bill includes measures like a $250 annual fee for EV drivers and the removal of EV and solar tax credits. ⁽¹⁾
Trump stated that Musk wasn’t content on the bill and suggested that their relationship might be over. “Elon and I had a great relationship. I don’t know if we will anymore,” Trump said.
Musk fired back on X, stating, “Without me, Trump would have lost the election.” He also called the bill a “disgusting abomination” and threatened to fund primary challenges against lawmakers who support it. ⁽²⁾
Tesla Loses $152 Billion in Market Value
Immediately following the online exchange, Tesla stock declined by 14% and removed $152 billion in market cap. This decline marked the largest single-day loss in Tesla’s history, which pushed the electric car maker out of the $1 trillion club to a market cap of $916.
The decline also came from Trump’s threat to cancel government contracts for Musk’s companies, including SpaceX and Tesla. At the time of writing, the stock is currently down around 24% YTD from its January high of $423. ⁽³⁾
Trump’s Warning
In an NBC News interview on Saturday, Trump warned of “serious consequences” if Musk funds Democratic candidates to oppose Republicans who back the tax-cut bill.
While Trump did not specify the consequences, he indicated that his relationship with Musk is over. This ongoing feud has also added pressure on Tesla’s existing challenges. ⁽⁴⁾
Tesla’s Weak Sales and Rising Competition
Beyond the political feud, Tesla is facing trouble with operational difficulties. Sales of its electric vehicles have plummeted in key European markets, and the company’s brand reputation is declining in the US. Additionally, Tesla is under pressure to launch its long-delayed driverless ride-hailing service in Austin, Texas, this month.
However, it faces competitive pressure from Waymo, which already operates a commercial robotaxi service in the same market as Uber. BYD, another fierce competitor, is overtaking Tesla globally. ⁽⁵⁾
BYD registered over 3,000 vehicles in the UK in May, overtaking Tesla, and is quickly closing in on its full-year sales. With its most affordable EV hitting the market, BYD is expected to gain even more ground this year. ⁽⁶⁾
Source: Investor’s Business Daily. Displaying A Comparison Chart Between Tesla and BYD EV Sales
BYD sells far more EVs than Tesla and now leads in EVs, revenue and net income. BYD makes a variety of EVs all through the price scale, with new models and big tech moves in recent months. BYD has entered most of the world outside of the US, with overseas sales soaring.
Bottom Line
The Musk-Trump feud, poor performance and declining market position have all added pressure to Tesla. As Musk’s relationship with the Trump administration comes to an unexpectedly hostile end, Tesla faces an uncertain future.
The company’s ability to navigate these financial, operational, and political hurdles will be critical in regaining investor confidence and any attempt to claw back its position as a leader in the EV industry.
