Tesla has faced another setback following its CEO, Elon Musk, becoming involved in a public dispute with Donald Trump.
The conflict arose after the tech mogul criticized a tax and spending bill supported by Trump, which, among other provisions, proposes an increase to the national debt ceiling – a measure Musk has openly denounced.
The two subsequently traded barbs on social media, culminating in Musk’s assertion that the US President is mentioned in the “Epstein files” – documentation gathered by investigators regarding convicted sex offender Jeffrey Epstein – while Trump retorted that Musk has “lost his mind”.
Tesla’s stock plummeted by more than 14 percent, erasing $153 billion (£113 billion) from its market capitalization, marking it as the second-largest decline the company has experienced since 2020.
Musk’s personal wealth also decreased by $34 billion (£25 billion).
While Tesla shares increased by 3.7 percent on Friday and approximately 0.5 percent shortly after the US markets opened on Monday, Trump’s threats to terminate federal contracts and tax incentives for Musk’s enterprises, along with the ongoing dispute between the two, have raised further concerns about the automaker’s capacity to rebound in the near term.
Trump also warned Musk of “very serious consequences” should he support Democratic candidates opposing the “big, beautiful bill”, which has progressed to the US Senate after being approved by the Republican-controlled House of Representatives.
When asked if he plans to repair his relationship with Musk, the US President responded: “No.”
Trump informed that he has “no intention” of communicating with Musk, whom he accused of being “disrespectful to the office of the President”.
1. Depart from the company
Peter Wells, a professor specializing in business and sustainability at Cardiff University, suggested that one possible avenue for Musk is to resign from his companies, thereby minimizing the risk that personal controversies surrounding the billionaire will influence their success.
The strong connection between Musk’s behavior and the public’s perception of Tesla was highlighted by protests that erupted at factories and showrooms worldwide following his appointment as director of the so-called Department of Government Efficiency (Doge), which was responsible for reducing US government expenditure and eliminating jobs.
The protests and calls for a boycott against the automaker have persisted over the weekend, even after Musk stepped down from the position last week.
Professor Wells remarked to The i Paper: “The fundamental issue for Elon Musk and Tesla is that the market valuation of the company has long been misaligned with its underlying fundamentals.
“What we observe now is that Tesla has lost its initial disruptive advantage, has not succeeded in delivering new products and innovations that could re-engage the market, has become a polarizing brand with environmentally conscious consumers on the left seeking to distance themselves, and of course, Musk himself has been sidetracked by numerous other projects and endeavors.
“Arguably, the most prudent course of action for Musk would be to step away from all of his businesses. It is frequently the case that the traits that render an individual effective as an entrepreneur do not necessarily align with those that make for a competent manager of an established enterprise.
“The overt and relatively ‘hard line’ conservative politics that Musk seems to advocate present an additional limitation.”
Professor Wells cautioned that Tesla’s market value could experience a sudden decline should Musk choose to withdraw from the company.
“The issue is that if Musk were to try to extricate himself from the businesses, there would be a significant drop in their valuation – at least in the short term, amidst what would be a costly disentanglement.
2. Request for assistance from Silicon Valley
Electric vehicles, along with the regulations governing their usage and sale, have become a contentious issue between Musk and his Republican supporters.
The spending and tax legislation proposed by Trump is anticipated to significantly impact the electric vehicle market in the US, where Tesla stands as the leading manufacturer.
This legislation would eliminate tax incentives of up to $7,500 (£5,500) for consumers purchasing electric vehicles, effectively increasing the purchase price of these cars. Additionally, it would withdraw financial support for battery manufacturing plants and lithium processing facilities, while also terminating funding for electric vehicle charging infrastructure.
In a significant setback for Tesla, the bill may also revoke regulations that permit Tesla to sell clean air credits to other automotive manufacturers that fail to comply with environmental regulations.
In the first quarter of 2025, Tesla sold regulatory credits valued at $595 million (£439 million) – surpassing the company’s net profit of $409 million (£302 million). Without these credits, Tesla would have reported a financial loss.
Musk’s introduction of self-driving taxis, which he anticipates could yield trillions of dollars for Tesla, has also been put at risk following the initiation of an investigation by the National Highway Traffic Safety Administration into incidents involving these vehicles in Austin, Texas.
Musk’s conflict with Trump may imply that officials at the agency will feel less constrained by the White House as they continue their investigation into the technology.
While these developments could pose challenges for Tesla, Akhil Bhardwaj, a senior lecturer in strategy and organization at the University of Bath, pointed out that Musk is not the only ally Trump has within the technology sector, suggesting that he will remain mindful of his policy’s effects on Silicon Valley when enacting legislation.
“Trump enjoys the backing of the ‘tech bros’, and he is unlikely to want to jeopardize that,” Professor Bhardwaj remarked.
Trump’s inauguration in January was marked by the presence of numerous tech leaders, including Meta CEO Mark Zuckerberg, Google CEO Sundar Pichai, and Amazon founder Jeff Bezos.
Amazon, Meta, and OpenAI CEO Sam Altman each contributed $1 million (£737,000) to the inaugural fund of the US President, along with Toyota and Uber.
“Preventing advancements like autonomous taxis will negatively impact the Silicon Valley ecosystem, not just Musk,” Professor Bhardwaj remarked.
According to Professor Bhardwaj, gaining support from Silicon Valley to persuade the Trump administration against unfavorable regulatory changes could benefit Musk; however, he proposed that a more prudent approach for the world’s wealthiest individual would be to “moderate his statements and step back from the spotlight.”
Amazon, Meta, and OpenAI CEO Sam Altman each contributed $1 million (£737,000) to the US President’s inaugural fund, along with Toyota and Uber.
“Preventing advancements like driverless taxis will negatively impact the Silicon Valley ecosystem, affecting more than just Musk,” Professor Bhardwaj remarked.
Securing backing from Silicon Valley to persuade the Trump administration against unfavorable regulatory changes could benefit Musk, Professor Bhardwaj noted, but he proposed that a more advantageous approach for the world’s wealthiest individual would be to “moderate his statements and step back from the spotlight.”
3. Remain with Tesla, avoid the spotlight
“At this point, Musk may simply wish to moderate his statements and step back from the spotlight,” Professor Bhardwaj stated. “Utilizing his connections could also prove beneficial, but I believe that not overshadowing Trump is likely the most crucial action he can take.”
Musk seems to have gradually distanced himself from the conflict, removing provocative posts on X, including his assertion that Trump was mentioned in the Epstein files.
Musk replied “yes” to a user’s comment advocating for Trump’s impeachment and replacement with Vice-President JD Vance. The post seemed to have been deleted from the platform.
In response to another billionaire and Trump supporter, Bill Ackman, who took to X urging the two to “reconcile for the good of our great nation,” Musk replied: “You’re not wrong.”