Global Head of Investment Strategy
Imagine riding a rollercoaster in pitch darkness—thrilling when climbing high, terrifying when plunging unexpectedly. Tesla investors find themselves strapped in exactly this way, as the electrifying drama between Elon Musk and Donald Trump sends them hurtling downward in spectacular fashion, with Tesla's shares plunging more than 14%.
What began as a mere policy disagreement has exploded into an all-out public feud between the billionaire CEO and the US president, rattling markets and wiping more than USD 140 billion off Tesla’s market value in a single day. Musk has openly labelled Trump’s sweeping tax and spending bill—famously dubbed the "one big beautiful bill"—as a "disgusting abomination" that recklessly balloons the federal deficit. Trump’s swift and furious response branded Musk as "crazy" and publicly threatened to rip up billions of dollars worth of crucial federal contracts and subsidies enjoyed by Tesla and SpaceX.
Musk’s recent exit from his brief political advisory role had initially seemed promising for Tesla’s focus on business rather than politics. However, investors now face a grim reality check as the political battle intensifies. The very subsidies and tax credits Trump threatens to axe have long bolstered Tesla’s profit margins. Specifically, the early termination of electric vehicle (EV) tax credits worth up to USD 7,500 per vehicle could slash roughly USD 1.2 billion annually from Tesla’s earnings—a severe blow to profitability that shareholders simply can’t ignore.
“Without me, Trump would have lost the election,” Musk recently jabbed on social media, adding pointedly: “Such ingratitude.” Musk even took the feud to a more personal level, suggesting Trump's name was linked to the controversial Epstein files—a provocative allegation that underscores the deeply personal nature of this escalating dispute.
The conflict has now moved beyond mere words and financial threats, with Musk dramatically escalating matters by announcing that SpaceX will immediately begin phasing out its Dragon spacecraft, a critical vehicle used by NASA to transport astronauts and supplies to the International Space Station. This bold decision underscores how intensely personal disagreements can rapidly spiral into operational disruptions with significant real-world implications.
This kind of rhetoric, colourful though it may be, only deepens investor anxiety. Musk’s audacious style, a magnet for both admiration and scrutiny, has always been a double-edged sword. But Tesla investors are increasingly forced to question whether their CEO’s public brawls are a liability they can afford.
The issue isn’t just theoretical: the political volatility is already hitting Tesla’s bottom line. In Germany, a key market, sales fell by a steep 36% in recent data, as some analysts link consumer hesitancy directly to Musk’s increasingly contentious public persona. Investors must now weigh whether Musk’s continued high-profile political skirmishes could jeopardise Tesla’s broader global growth ambitions.
But the risks stretch beyond Tesla’s auto operations. Musk’s ventures, especially SpaceX, rely heavily on US government contracts worth more than USD 20 billion. Trump’s threats, while complex to implement immediately, create a dangerous cloud of uncertainty. Any abrupt reduction in federal funding would send shockwaves not just through Musk’s companies but also across the broader market of government-dependent tech enterprises.
Beyond the immediate implications for Tesla, Musk’s clash with Trump highlights broader dangers for investors in politically-sensitive sectors. This feud vividly demonstrates how swiftly personal politics can escalate into corporate vulnerability, raising red flags for investors backing other high-profile, outspoken CEOs. It’s a stark reminder that when corporate leadership engages too deeply in the political fray, investors often end up paying the price.
Could this dramatic public rupture trigger a broader rethink among investors regarding CEO-driven companies, whose leaders have enormous influence—sometimes too much—in shaping market sentiment? Investors might soon demand a premium for political neutrality as much as for visionary leadership.
The immediate spotlight will fall on the Senate vote regarding Trump’s tax bill, slated to happen within weeks. Musk has rallied some senators to reconsider elements of the legislation, and any significant amendments could substantially alter Tesla’s financial landscape. Investors need to track this vote closely, as it directly affects Tesla’s future profitability.
Equally crucial is Tesla’s imminent launch of its robotaxi programme in Austin. A successful debut could refocus the narrative onto Tesla’s innovation and product potential, providing a timely boost to investor sentiment. However, any hiccups now would be magnified under heightened scrutiny, potentially leading to further market turbulence.
In practical terms, amid the volatility, it is wise to:
Ultimately, investors must remain agile, informed, and prepared to reassess their positions as political and operational events unfold.
For Tesla investors, the message is clear: Musk’s political fireworks, once viewed as eccentric entertainment, now threaten to overshadow Tesla’s fundamental strengths and disrupt shareholder value. Until this storm passes, investors might want to fasten their seatbelts and brace for a volatile ride. The Tesla rollercoaster, fuelled by Musk’s relentless energy and Trump’s mercurial policies, shows no sign of slowing down anytime soon.
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