ISLAMABAD (PEN) : Tesla stock tumbled 14% on Thursday, erasing $150 billion in market value, as a public clash between U.S. President Donald Trump and CEO Elon Musk escalated, sparking investor anxiety over political and regulatory risks facing the electric vehicle maker.
The selloff came amid heavy trading volume and in the absence of company-specific news, underscoring the market’s sensitivity to the political storm now engulfing one of the world’s most valuable automakers.
Political Rift Spooks Investors
The fallout began after Musk criticized President Trump’s sweeping tax-and-spend legislation, calling it a “disgusting abomination.” Trump retaliated by accusing Musk of opposing the bill due to the elimination of tax incentives for electric vehicles.
“The easiest way to save money in our Budget, billions and billions of dollars, is to terminate Elon’s governmental subsidies and contracts,” Trump wrote on his Truth Social platform.
Musk responded with a barrage of posts on X, including a “yes” reply to a comment suggesting the president should be impeached.
Tesla Faces Mounting Regulatory Pressure
Analysts warn that the feud could have regulatory implications, particularly for Tesla’s ambitions in autonomous driving. The company is currently under investigation by the U.S. Department of Transportation and the National Highway Traffic Safety Administration (NHTSA) over its “Full Self-Driving” system, following a fatal crash.
“Elon’s politics continue to harm the stock,” said Dennis Dick, chief strategist at Stock Trader Network. “First he aligned himself with Trump, which alienated Democratic buyers. Now he’s turned on the administration.”
Tesla has prioritized development of a fully autonomous robotaxi, and Musk has staked much of Tesla’s future on the project. Federal approval, however, remains a significant hurdle.
“This creates a negative force against Tesla,” said Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management. “It could derail regulations and invite more scrutiny.”
Subsidy Cuts and Market Impact
The House version of Trump’s budget bill would phase out the \$7,500 EV tax credit by the end of 2025—a move that could hit Tesla with a \$1.2 billion annual profit loss, according to J.P. Morgan. Additional Senate proposals targeting California’s EV mandates could result in another \$2 billion impact from lost regulatory credit sales.
Morningstar analyst Seth Goldstein said the risk of Tesla being singled out by regulators remains low but acknowledged the political risk. “Being on Trump’s bad side always carries a risk of retaliation,” he noted.
Federal regulators may also explore new safety requirements for autonomous vehicles that could disadvantage Tesla’s camera-only approach in favor of lidar-equipped systems used by rivals.
Musk’s Net Worth Suffers Blow
Thursday’s stock decline dealt a major hit to Musk’s personal fortune. According to Forbes, his net worth fell by approximately \$27 billion, bringing it down to \$388 billion.
Tesla’s valuation has already seen sharp swings in recent months. After Musk endorsed Trump’s re-election campaign in July 2024, shares surged 169% before sliding 54% by April amid the “Tesla Takedown” protests and growing political polarization around the CEO.
Despite Thursday’s plunge, Tesla remains the world’s most valuable automaker, with a market cap of around \$1 trillion—well ahead of Toyota’s \$290 billion.
Investor Sentiment Shifting
Tesla’s premium valuation, trading at 150 times forward earnings, continues to draw scrutiny.
“There were a lot of people excited about Tesla because the political winds were at his back. Now they’ve turned into headwinds,” said Steve Sosnick, chief strategist at Interactive Brokers.
“I am short Tesla. I don’t understand it. I don’t understand its valuation. I don’t understand its fundamentals,” added Bob Doll, Chief Investment Officer at Crossmark Global Investments.
As tensions between Musk and Trump deepen, market observers are closely watching how the political standoff may influence future policy decisions, investor sentiment, and Tesla’s ambitious roadmap in autonomous driving and EV dominance.
