A reignited Trump-Musk feud burns Tesla investors, shares of EV company tumble 7%

Key Points

• Tesla shares tumbled 8% at Monday’s open after Elon Musk reignited his feud with Donald Trump by announcing a third political party in protest of the new Republican spending bill.
• Investors fear the spat could jeopardize crucial federal subsidies and lead to fresh regulatory hurdles for Tesla and SpaceX as Trump warns he may retaliate.
• Since reaching a Dec. 17 peak, Tesla stock has plunged about 40%, with further declines tied to Musk’s overt political affiliations and right-wing backlash.
• Tesla also faces intensifying global competition, especially from Chinese EV makers, compounding the pressure on the company amid market volatility.

Shares of Tesla tumbled 7% Monday as the feud between CEO Elon Musk and Trump reignited over the weekend.

Musk, once a top donor and ally of Trump, announced that he was forming a third political party in protest over the Republican spending bill that passed late last week. Musk has been highly critical of the bill, which he said would kill jobs and bog down burgeoning industries.

In a social media post on Sunday, Trump said that the billionaire owner of SpaceX, Tesla and X had gone “off the rails” in recent weeks.

Investors fear that Musk’s companies, which receive significant subsidies from the federal government, could suffer further if his feud with Trump continues to fester.

"With the autonomous future ahead and the AI Revolution in full force Musk/Tesla do not need to keep poking the bear as Trump can create more hurdles for Musk/Tesla/SpaceX over the coming years if this political battle gets nastier heading into mid-terms in 2026," Wedbush Securities analyst Dan Ives wrote in a note to clients late Sunday.

Tesla shares have been extremely volatile since Musk went all-in for Trump in the run-up to last year’s election with the company facing a growing backlash as a result of Musk’s embrace of right-wing politics and his role in the Trump administration.

Tesla sales plunged 13% in the first quarter, and then repeated that performance in the second quarter, even though EV sales continue to rise for competitors, including big Detroit automakers. Industry analysts believe a large part of that tail off is being driven by Musk's affiliation with Trump and far-right parties like Germany AfD.

Tesla is also facing rising competition globally, particularly from Chinese automakers such as BYD and Great Wall, which are quickly expanding globally, offering relatively affordable electric vehicles with ultra-fast battery charging systems.

Since hitting an all-time high of $479.76 on Dec. 17, Tesla shares have lost about 40% of their value. Tesla shares are down about $26 each since Thursday's close, to $289.75.