Tesla Stock Tanks After Trump Skewers Musk’s ‘New Party’

Elon Musk’s announcement of a new American political party caused a significant drop in Tesla’s stock price. The announcement led to criticism from former President Donald Trump, intensifying concerns about Musk’s focus and potential impact on Tesla’s performance. The situation highlights investors’ worries about Musk’s political involvement and its effect on the company.

Tesla’s stock (TSLA) fell by as much as 7.6% in premarket trading and during the trading day after Elon Musk announced the formation of the “America Party.” The drop was in no small part due to Donald Trump’s criticism of Musk’s move, calling it “ridiculous” and predicting “disruption & chaos.” Trump also mentioned Musk’s criticism of his policies and the new party’s potential to sow confusion.

Musk promised X followers to create the “America Party,” which he claims will challenge the political establishment. His party would utilize ancient Greek war strategies by implementing “extremely concentrated force at a precise location on the battlefield.”

Investors are worried about the potential for increased friction between Musk and Trump, which could lead to cuts in US government EV subsidies. There are concerns that Musk is distracted from his role at Tesla due to his involvement in politics. The feud between Musk and Trump began in early June when the billionaire bromance came to an end after Musk criticized Trump’s tax and domestic policy bill, the so-called “Big Beautiful Bill.”

Over the weekend, Trump wrote on Truth Social, “I’m saddened to watch Elon Musk go completely ‘off the rails,’ essentially becoming a TRAIN WRECK over the past five weeks.”  Later, ahead of boarding Air Force One in New Jersey, Trump also called Musk’s announcement “ridiculous” and said it would sow confusion.

Tesla has faced increasing competition and reported a record fall in second-quarter sales and also the first-ever annual decline in sales as a public company. The company is also poised to lose its title as the world’s largest EV maker to BYD. Musk’s involvement at the wheel of the US government and subsequent political activities have caused controversy. After previously announcing he would step down from his government position, he is now again heavily involved in politics due to the new political party.

Tesla’s stock has declined significantly since mid-December, when it reached a record high, driven by expectations of a beneficial alliance between Trump and Musk.

In his Sunday Truth Social post, Trump also said third political parties “have never succeeded in the United States” and that “the one thing (they) are good for is the creation of Complete and Total DISRUPTION & CHAOS.”

Musk’s decision notably follows his exit from the Trump administration, which led to a public blowout between him and the president. While Musk has since issued an apology, he appears to still be on bad terms with Trump, which have only worsened once Trump signed his signature piece of legislation into law, the so-called “Big Beautiful Bill.”