Tesla’s stock took a staggering 14% nosedive in a single day, shaking the market and wiping out $152 billion in market value as its market capitalization fell below $1 trillion.
The primary reason behind this sudden drop? The escalating feud between former President Donald Trump and Tesla CEO Elon Musk, which has stirred up political and economic uncertainty and left investors on edge.
Trump vs. Musk: The Intensifying Conflict
Musk recently lashed out against Trump’s tax cut policy, criticizing it as “a plan for big corporations.” In response, Trump accused Musk of being “ungrateful” and even hinted that Tesla’s federal contracts could be reconsidered.
Additionally, Musk publicly claimed that Trump’s name appeared in Epstein-related government documents, further inflaming tensions. These political entanglements have raised concerns over potential government subsidy reductions for Tesla, negatively impacting investor sentiment.
Other Factors Behind Tesla’s Stock Decline
Beyond political turmoil, several additional reasons contributed to Tesla’s stock slump:
Potential Repeal of EV Tax Credits:
JP Morgan warned that Tesla’s annual revenue could shrink by $1.2 billion if Trump’s administration eliminates EV tax credits. Considering Tesla’s automotive business accounts for 78.9% of its total revenue with a gross profit margin of 18.4%, the removal of tax incentives could significantly hurt profitability.Weak Sales in China and Europe:
Tesla’s May sales in China plummeted by 36% year-over-year, raising concerns about declining global demand. Meanwhile, in Europe, mounting competition has also weighed on Tesla’s sales figures.Challenges to the Robo-Taxi Business:
Tesla’s Robo-Taxi service is set to launch on June 12, 2025, in Austin, Texas, with initial deployment using Model Y vehicles before transitioning to Cybercab autonomous cars. However, federal legislation aimed at easing emissions regulations may cut Tesla’s $2 billion in carbon credit revenue, creating an additional financial strain. With Musk lobbying lawmakers for self-driving regulation reforms, his feud with Trump may pose further obstacles to Tesla’s autonomous taxi expansion.
Conclusion: Buy or Sell Tesla?
Tesla was once considered a Trump-era beneficiary, enjoying tax breaks and subsidies under his administration. However, escalating political tensions between Trump and Musk have prompted many investors to reduce their Tesla holdings amid uncertainty.
With Tesla’s stock down 29.5% year-to-date at $284.7, volatility remains high, meaning that while risks exist, so does the potential for a strong rebound. Despite political headwinds, Tesla’s dominance in self-driving technology could eventually boost its valuation.
Elon Musk remains a high-risk, high-reward visionary, driving breakthroughs with SpaceX, Neuralink, xAI, and Tesla. Tesla is the only publicly traded company among Musk’s ventures, making it a unique investment opportunity in the future technology landscape. Holding some Tesla exposure may be worthwhile for long-term investors betting on innovation.
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