Tesla faces mounting headwinds as CEO Elon Musk’s divisive entry into US politics rattles markets and deepens an increasingly acrimonious standoff with former ally Donald Trump.
Investors are voicing fresh anxieties about Musk’s latest foray after he declared the formation of a new “America Party,” intended to disrupt the nation’s entrenched two-party system.
Trump, who recently signed a controversial tax cut and spending bill criticized by Musk, dismissed the move outright on Sunday, calling third-party efforts “ridiculous” and warning that Musk can try but will not succeed. America will alway have a two-party system, Trump told reporters, later doubling down in a social media post that expressed concern for Musk’s public trajectory.
Tesla shares floundered on Monday in early Asia trading, dropping 7% in pre-market, while Wall Street strategists anticipate heightened volatility. The electric vehicle pioneer’s stock has slumped more than 20% this year, weighed down by operational challenges and persistent unease over the CEO’s shifting focus.
Analysts warn that Musk’s political ambitions could amplify existing headwinds for Tesla. Daniel Ives of Wedbush suggested in a client note that the move threatens to alienate the company’s core investors at a sensitive juncture.
Diving deeper into politics is exactly the opposite direction shareholders want from Musk right now, Ives cautioned, adding that the company’s board may need to intervene if the distraction continues.
Pressure is already mounting on Tesla’s fundamentals. Second-quarter sales slipped 13% globally, putting the company on track for a second consecutive annual decline.
In China, upstarts like BYD and Xiaomi continue to erode market share with innovative, lower-priced alternatives, while incremental growth at Tesla’s Shanghai plant has failed to reverse the trend. Europe remains a bright red spot—sales dove nearly 30% in May, marking a fifth straight month of declines even as the region’s EV market expands.
Investor sentiment is further clouded by Musk’s public spat with Trump, which came to a head when Musk exited his federal role in a high-profile disagreement over government spending. Musk renewed criticism of the administration last week, decrying the latest budget package as harmful to emerging industries and accusing Trump of capitulating to legacy interests.
US Treasury Secretary Scott Bessent was among those urging restraint, arguing that Musk’s businesses need his attention more than his political aspirations. Boards of his companies want him running those companies, Bessent told CNN, signaling concern over the growing distraction.
