Tesla’s stock experienced a significant downturn on Thursday following a public dispute between President Donald Trump and CEO Elon Musk, who has referred to Trump as his “First Buddy.”
As tensions escalated, investor anxiety grew regarding the potential implications for Musk’s extensive business interests. By the close of trading, Tesla’s shares had plummeted 14 percent, erasing approximately $150 billion (around Rs. 1,28,621 crore) in market capitalization, despite the absence of any other news regarding the company.
Heavy trading ensued as traders reacted to Musk’s swift rebuttal to Trump’s remarks, with the Tesla chief taking to social media to criticize the president’s tax reform plan. Trump countered Musk’s comments by asserting that the CEO was dissatisfied because the tax changes eliminated benefits for electric vehicle purchases.
An ongoing feud with Trump could create multiple challenges for Tesla and Musk’s broader corporate endeavors. The U.S. Department of Transportation oversees vehicle design regulations, which play a crucial role in determining whether Tesla can mass-produce its proposed autonomous robotaxis, which would lack traditional pedals and steering wheels.
The agency is also investigating Tesla’s “Full Self-Driving” feature following an incident resulting in a fatal crash.
“Elon’s political stance continues to negatively impact the stock prices. Initially, he aligned himself with Trump, alienating many potential Democratic customers. Now he has shifted to opposing the Trump administration,” commented Dennis Dick, a Tesla shareholder and chief strategist at Stock Trader Network.
With electric vehicle sales declining, Musk has focused Tesla’s future on developing self-driving robotaxis. During a previous earnings call, he advised investors to “sell their Tesla stock” if they doubted the company’s ability to overcome the technological hurdles associated with driverless cars. Wedbush analysts have indicated that the potential market value of AI and autonomous technologies could reach $1 trillion (around Rs. 85,73,329 crore).
Musk has also advocated for a unified federal approval process for autonomous vehicles to alleviate the complexity arising from varying state regulations.
Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, stated that the conflict with Trump “creates a negative momentum for Tesla,” potentially jeopardizing regulatory support and increasing the likelihood of additional government scrutiny.
“Any perceived advantages Musk had now seem to be turning into disadvantages,” Gerber remarked.
Musk, currently the world’s wealthiest individual and involved in the Department of Government Efficiency’s (DOGE) cost-reduction initiatives, criticized Trump’s recent “big beautiful bill” earlier this week while tending to his corporate priorities over White House duties. Following the sell-off on Thursday, Musk’s net worth declined by approximately $27 billion (around Rs. 2,31,557 crore) to an estimated $388 billion (roughly Rs. 33,27,310 crore), according to Forbes.
Trump asserted on his Truth Social platform that one of the simplest ways to cut budget deficits would be to eliminate financial support and contracts for Musk.
Transportation Secretary Sean Duffy has proactively exempted certain autonomous vehicles from particular safety criteria, and the National Highway Traffic Safety Administration (NHTSA) announced in April its active engagement in formulating an extensive regulatory framework for self-driving cars.
While the federal government has begun to simplify some regulations connected to autonomous driving, analyst Seth Goldstein of Morningstar warned that regulators might devise rules that could disproportionately impact Tesla.
Unlike most autonomous vehicle producers that utilize radar and lidar for object detection, Tesla relies exclusively on cameras. Goldstein pointed out that regulators may mandate lidar technology, which could adversely affect Tesla’s operations. “Being in discord with President Trump raises the odds of facing personal reprisal,” Goldstein cautioned, although he expressed skepticism about such outcomes due to broader industry advocacy for new regulations.
Tesla’s stock has experienced volatility since Musk’s endorsement of Trump in mid-July 2024 during the latter’s re-election campaign, climbing 169 percent through mid-December before sliding 54 percent in early April amidst increasing protest against Tesla.
The House of Representatives’ proposal for Trump’s budget bill seeks to mostly eradicate the popular $7,500 (approximately Rs. 6.43 lakh) electric vehicle subsidy by the conclusion of 2025. Tesla and other manufacturers have depended on these incentives for years to stimulate demand, but Trump previously indicated intentions to terminate the subsidy.
According to J.P. Morgan, Tesla could face a potential hit of $1.2 billion (approximately Rs. 10,290 crore) to its annual profits, along with an additional $2 billion loss pertaining to regulatory credit sales due to separate Senate legislation aimed at California’s EV sales mandates.
Despite the challenges, Tesla remains the largest automaker in terms of market value, standing at around $1 trillion (approximately Rs. 85,73,329 crore), far surpassing Toyota Motor’s $290 billion valuation (around Rs. 24,87,019 crore).
Steve Sosnick, chief strategist at Interactive Brokers, remarked that enthusiasm for Tesla was once buoyed by favorable political conditions but has since encountered significant headwinds in various forms.
Tesla’s valuation stands at 150 times its profit estimates, a considerable premium compared to other tech giants like Nvidia.
“I am short Tesla. I’m struggling to understand its valuation and fundamentals. It appears to be excessively hyped,” commented Bob Doll, chief investment officer at Crossmark Global Investments.
© Thomson Reuters 2025
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