Tesla Stock Dropped

Tesla shares dropped as much as 7.6% in premarket trading on Monday after CEO Elon Musk unveiled plans to form a new American political party—an announcement that immediately drew fire from U.S. President Donald Trump, who dismissed the move as “ridiculous” and warned it would create “disruption and chaos.”

By 7:48 a.m. ET, Tesla stock (TSLA) had recovered slightly but was still down 6.5%, marking one of the sharpest early drops for the company in recent weeks.

The political fallout isn’t just headline drama—it’s triggering real concern among investors about Tesla’s future direction, Musk’s focus, and the potential risk to electric vehicle subsidies under Trump’s administration.

Why Investors Are Spooked: More Than Just a Tweet War

According to Neil Wilson, chief market strategist at Saxo Markets, the stock plunge stems from two critical investor concerns:

Policy Risk: Trump’s growing hostility toward Musk could lead to policy retaliation, including potential cuts to federal EV subsidies that benefit Tesla.

Leadership Distraction: Investors worry Musk is getting pulled back into politics, potentially diverting attention from Tesla's core business amid rising competition from global EV manufacturers.

“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 said in a market note.

This worry comes at a time when Tesla is already facing significant headwinds, including:

Slowing EV demand in key global markets

Aggressive pricing and innovation from Chinese EV rivals like BYD and Nio

Ongoing challenges in scaling new technologies like Full Self-Driving (FSD) and the Cybertruck

Political Firestorm: The Trump-Musk Rift Escalates

The clash between Trump and Musk has been brewing for weeks. It intensified after Musk publicly criticized Trump’s “Big, Beautiful Bill,” calling it fiscally irresponsible and accusing both parties of contributing to a corrupt and broken system.

“When it comes to bankrupting our country with waste & graft, we live in a one-party system, not a democracy,” Musk posted on X (formerly Twitter).

“Today, the America Party is formed to give you back your freedom.”

Trump fired back on his platform, Truth Social, saying Musk had gone “off the rails” and likening his political efforts to a “train wreck.” He also dismissed third-party movements as historically ineffective, warning they often create “Complete and Total DISRUPTION & CHAOS.”

What This Means for Tesla Shareholders

While some analysts see the political drama as short-term noise, others warn it could have long-term implications, especially if Tesla’s brand becomes entangled with political instability.

Here’s what investors should watch for:

Policy Changes: If Trump gains influence over Congress or wins reelection, federal EV incentives—an important factor in Tesla’s U.S. growth—could be rolled back or eliminated.

Brand Risk: Tesla’s consumer base is diverse, and political activism from Musk may polarize customers, particularly those who value environmental and social neutrality.

Leadership Capacity: With Musk juggling roles across Tesla, SpaceX, X, Neuralink, and now a political movement, questions about his ability to stay laser-focused on Tesla's innovation pipeline are growing louder.

Reversal of Fortune: Tesla’s Rocky 2025 So Far

Tesla started the year with optimism, thanks to early signs of EV market recovery and excitement around AI-driven features in its vehicles. But momentum has slowed. The company is now facing:

Falling margins due to aggressive price cuts

Regulatory scrutiny in Europe and the U.S.

Delays and operational issues with new product launches

Combined with Musk’s political activities, the stock's decline is increasingly seen as more than a market correction—it reflects deepening investor skepticism about the company’s strategic focus.

Bottom Line: Is Tesla Still a Buy?

Whether you’re a long-term Tesla bull or a cautious observer, Musk’s foray into politics introduces a new variable to Tesla’s investment thesis. The fundamental business is still strong, with global reach, advanced manufacturing, and loyal customer demand. But external risks are rising—from both competitors and political backlash.

Investors should monitor:

Developments in U.S. energy and automotive policy

Further statements or moves from Trump’s administration

Tesla’s Q3 earnings and delivery numbers

Musk’s public communications and time allocation

In an era where CEOs are increasingly seen as cultural icons, Musk’s every move matters—not just to Wall Street, but to Washington too.