London
CNN
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Shares in Tesla tanked by as much as 7.6% in premarket trading Monday after its CEO Elon Musk said he is forming a new American political party, provoking an irate response from US President Donald Trump.
Tesla stock (TSLA) later recovered some of its earlier losses but was still 6.5% down by 7:48 a.m. ET.
“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 his Truth Social platform late Sunday, also mentioning Musk’s Saturday announcement that he is forming a political party to rival the main Republican and Democratic parties.
Ahead of boarding Air Force One in New Jersey Sunday, Trump also called Musk’s announcement “ridiculous” and said it would sow confusion.
Neil Wilson, a strategist at UK trading platform Saxo Markets, said Monday that Tesla investors were concerned on two fronts: firstly, that further friction between Musk and Trump would lead to additional cuts to US government EV subsidies and, secondly, that Musk appeared “distracted.”
“Investors had cheered Musk stepping back from frontline politics but are now worried he’s going to (be) sucked back in and take his eye off Tesla,” Wilson wrote in a note.
Trump and Musk began trading barbs in early June after the Tesla CEO criticized Trump’s so-called “Big, Beautiful Bill” — a massive tax and domestic policy bill, which the president signed into law last week. Musk has argued that the policies will add trillions of dollars to the federal budget deficit.
“When it comes to bankrupting our country with waste & graft, we live in a one-party system, not a democracy,” Musk said on his social media platform, X, Saturday. “Today, the America Party is formed to give you back your freedom.”
Trump, in his Sunday post, said third political parties “have never succeeded in the United States” and that “the one thing (they) are good for is the creation of Complete and Total DISRUPTION & CHAOS.”
Tesla’s fortunes have taken a turn in recent months as it has grappled with intensifying competition from rival EV makers and the fallout from Musk’s foray into US politics.
Last week, the company reported a record fall in second-quarter sales, selling 13.5% fewer vehicles compared with the same period in 2024. For that year, Tesla has also reported its first-ever annual decline in sales as a public company. The drop was small — around 1% — though it marks a striking turnaround for an automaker historically accustomed to robust sales growth.
Notably, Tesla is poised to lose its title as the world’s largest EV maker, based on annual sales, to Chinese automaker BYD, even though BYD has not entered the US market.
Meanwhile, Musk’s recent involvement at the wheel of the US government, helming the Department of Government Efficiency and spearheading mass layoffs of federal workers, has, among other controversies, sparked protests outside Tesla’s showrooms worldwide.
In May, Musk announced he would step down from his government position, raising hopes among investors that he will now have more time to work on his companies, which include SpaceX and X. But the billionaire’s feud with Trump, and likely upcoming attempts to woo voters to his new party, have thrust him back into the political arena.
The tumult has weighed on Tesla’s stock, with the company’s shares having shed almost 23% of their value so far this year.
