Tesla shares fell sharply on Tuesday as the increasingly bitter feud between CEO Elon Musk and US President Donald Trump flared into the open once again, sparking concerns about potential political retaliation against Musk’s businesses and further spooking investors.
Shares of Tesla, already down more than 20% in 2025 amid weakening demand and growing backlash against Musk, dropped nearly 6% in early trading. The electric vehicle maker's stock was weighed down by renewed hostilities between Musk and Trump, including threats over subsidies, government contracts, and regulatory scrutiny.
As of 10:07 am ET on July 1, Tesla shares were trading at $303.87, down 4.34%.
The latest blowup began over the weekend, with Musk posting on X that a new Republican-backed spending bill would be “political suicide for the Republican Party.”
As the Senate worked through the legislation in a tense overnight session, Musk escalated his rhetoric, saying on X: “Every member of Congress who campaigned on reducing government spending and then immediately voted for the biggest debt increase in history should hang their head in shame... And they will lose their primary next year if it is the last thing I do on this Earth.”
Hours later, Musk went further, announcing he may launch a new political movement. “If this insane spending bill passes, the America Party will be formed the next day... Our country needs an alternative to the Democrat–Republican uniparty so that the people actually have a VOICE,” he wrote on X.
In a Truth Social post early Tuesday, Trump responded with sharp attacks on both Musk and the subsidies that have supported Tesla and SpaceX. “Elon may get more subsidy than any human being in history, by far, and without subsidies, Elon would probably have to close up shop and head back home to South Africa,” Trump wrote, as reported by AP.
Trump also implied that Musk’s companies — which receive billions in federal contracts and incentives — could be targeted for cost cuts. “No more Rocket launches, Satellites, or Electric Car Production, and our Country would save a FORTUNE... Perhaps we should have DOGE take a good, hard, look at this? BIG MONEY TO BE SAVED!!!” he wrote, referencing the Department of Government Efficiency (DOGE), which Musk had previously helped establish.
Later in the day, speaking from the White House lawn before departing for Florida, Trump reiterated his frustration. “He’s very upset. You know, he can lose a lot more than that, I’ll tell you right now. Elon can lose a lot more than that,” he said when asked if he intended to take further action against Musk, according to AP.
When pressed on whether Musk could be deported, Trump joked: “We’ll have to take a look... We might have to put DOGE on Elon. You know what DOGE is? DOGE is the monster that might have to go back and eat Elon. Wouldn't that be terrible? He gets a lot of subsidies.”
Musk, while initially signalling a desire not to escalate the conflict, fired back with another veiled jab at Trump on X: “What good is Doge saving $160B when this bill increases the debt ceiling by $5T? It makes mockery of the work.
In a note to clients on Tuesday, Wedbush Securities analyst Dan Ives described the unfolding feud as a major overhang on Tesla’s stock. “This BFF situation has now turned into a soap opera that remains an overhang on Tesla’s stock with investors fearing that the Trump Administration will be more hawkish and show scrutiny around Musk-related US government spending related to Tesla/SpaceX and most importantly the autonomous future with the regulatory environment key to the future of Robotaxis and Cybercabs,” Ives wrote, quoted AP.
“We would expect the stock to be weak to kick off trading this morning as the Street will show concern that the Trump and Musk once BFF relationship now backfires and turns into a junior high school friendship gone bad into an enemy.”
Tesla’s market share in China — its largest international market — has fallen to 7.6% in the first five months of 2025, down from 10% last year and a peak of 15% in 2020. Analysts attribute the decline to increasing competition from domestic automakers offering newer, feature-rich EVs at lower prices. The most recent threat comes from Xiaomi’s YU7 SUV, which received strong pre-orders just hours after its launch, according to Reuters.
“Lagging sales in Europe compared to the rest of the EV market and the increasing competition in China are both working against Tesla going forward,” said Sam Fiorani, vice president at AutoForecast Solutions, the agency quoted.
Tesla’s management has hinted at a cheaper version of the Model Y, which was expected to enter production by the end of June, though Reuters reported in April that the model’s release had been delayed by “at least a few months.”
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