Relations between Elon Musk and President Trump have taken a dramatic turn, significantly impacting Tesla's stock performance. Following a heated exchange of words over policy disagreements, Tesla's shares experienced one of their steepest declines in recent years. This week, the market reacted strongly to the escalating tension, with Tesla's stock plummeting nearly 15 percent. Despite a slight recovery on Friday, investor sentiment remains cautious due to potential repercussions from the political spat.
Concerns are mounting over how this conflict might affect Tesla’s future operations. The federal government could impose stricter scrutiny on autonomous driving technology, an area central to Tesla's strategic focus. Additionally, there is uncertainty regarding federal contracts and subsidies that benefit Musk's enterprises. Analyst James Stanley from StoneX noted that while investors previously overlooked present challenges by focusing on long-term prospects, the current situation casts doubt on Tesla's valuation. Despite these worries, some analysts maintain optimism about the company's technological leadership in autonomous vehicles.
The ongoing feud has broader implications for Tesla's financial health. A Republican spending bill proposes eliminating a $7,500 federal tax credit for electric vehicles, potentially reducing Tesla's annual profits by up to $1 billion. Furthermore, plans to dismantle regulations enabling Tesla to sell clean air credits could severely impact its revenue streams. Since Trump's election, Tesla's stock has seen significant volatility, rallying at the end of 2024 before facing consumer backlash this year. As the battle unfolds, it underscores the importance of stable political relations for businesses heavily reliant on government incentives and regulations.