TLDR
- Tesla shares fell nearly 7% in premarket trading after CEO Elon Musk announced plans to launch the “America Party” political movement
- Investors express concern about Musk’s divided attention between Tesla and political activities during crucial periods for autonomous vehicles and robotics
- Trump called Musk’s party plans “ridiculous” and criticized the CEO as going “off the rails”
- Tesla’s vehicle sales dropped 13% in the first half of 2025 to 721,000 units, well below Wall Street expectations
- Analysts worry about “exhaustion” from investors over Musk’s continued political involvement after leaving his government role
Tesla stock took a hit Monday morning as CEO Elon Musk’s weekend announcement of a new political party raised fresh questions about his focus on the electric vehicle maker. Shares dropped nearly 7% in premarket trading to $295.65 after Musk unveiled the “America Party” on Saturday.
The timing couldn’t be worse for Tesla investors. The company is preparing to launch its long-awaited self-driving taxi service and plans to start selling humanoid robots in 2026. These ventures could be worth hundreds of billions to trillions of dollars according to Wall Street analysts.
By a factor of 2 to 1, you want a new political party and you shall have it!
When it comes to bankrupting our country with waste & graft, we live in a one-party system, not a democracy.
Today, the America Party is formed to give you back your freedom. https://t.co/9K8AD04QQN
— Elon Musk (@elonmusk) July 5, 2025
“Very simply, Musk diving deeper into politics and now trying to take on the Beltway establishment is exactly the opposite direction that Tesla investors want him to take during this crucial period,” said Wedbush analyst Dan Ives. The analyst still maintains a Buy rating with a $500 price target.
Musk’s political move came after running a poll on X asking his 225 million followers if a new party should be created. The poll received almost 79 million votes, with 65.4% saying yes. He launched the party to oppose President Trump’s “One Big Beautiful Bill” that was signed into law Friday.
Political Tensions Heat Up
The announcement escalated Musk’s ongoing feud with Trump, who responded harshly on his social media platform. “I am saddened to watch Elon Musk go completely ‘off the rails,’ essentially becoming a TRAIN WRECK over the past five weeks,” Trump wrote using his characteristic capitalization.
Trump called third parties unsuccessful and said they only create “Complete and Total DISRUPTION & CHAOS.” He also mentioned that Musk’s business interests in space would have presented conflicts of interest.
The discord between the two men erupted into a full social media battle in early June. Trump has threatened to cut Musk’s government contracts and subsidies over their disagreements.
Neil Wilson, UK investor strategist at Saxo Markets, said investors worry about two main issues. First is potential Trump retaliation affecting subsidies. Second is a distracted Musk taking his focus away from Tesla.
“Investors are worried about more Trump ire affecting subsidies and the other, more importantly, is a distracted Musk,” Wilson explained. Many had cheered when Musk decided to scale back political spending in May and committed to remaining Tesla CEO for five years.
Business Performance Struggles
Tesla’s core electric vehicle business needs attention. The company sold about 721,000 vehicles in the first half of 2025, down 13% from the same period last year. Wall Street had expected closer to 970,000 vehicles sold by now.
Analysts have lowered their full-year projections to 1.7 million vehicles, down from 1.8 million sold in 2024. The disappointing sales partly stem from Musk’s political activities turning off some core EV buyers who lean left politically.
Tesla management acknowledged brand challenges during their first quarter earnings call in April. The company reports second-quarter earnings on July 23, which should provide more insight into the sales decline.
Investment firm Azoria Partners delayed listing a Tesla exchange-traded fund following Musk’s announcement. CEO James Fishback posted critical comments on X about the new party and called for Tesla’s board to clarify Musk’s political ambitions.
Board Under Pressure
Tesla’s board faces growing pressure to address Musk’s outside activities. Chair Robyn Denholm denied reports in May that board members were looking to replace the CEO. The board has been criticized for failing to provide oversight of Musk as he manages five other companies alongside his political interests.
“This is exactly the kind of thing a board of directors would curtail – removing the CEO if he refused to curtail these kinds of activities,” said Ann Lipton, a University of Colorado Law School professor. She noted Tesla’s board has been “fairly supine” and unlikely to take action now.
The new party undermines confidence shareholders had that Musk would focus more on Tesla. Investors had shown relief when he left his Department of Government Efficiency role in April, but that relief was short-lived.
Treasury Secretary Scott Bessent told CNN that while DOGE’s cost-cutting principles were popular, Musk was not. He suggested company boards would encourage Musk to focus on business rather than politics.
Tesla stock performance reflects these concerns. Shares soared to over $488 in December after Trump’s election victory but have lost 35% since then. The stock closed last week at $315.35 and is the worst performer among the “Magnificent Seven” high-growth companies this year.
Tesla stock has technical support around the $300 level according to Fairlead Strategies founder Katie Stockton. This level represents where investors have historically bought shares during previous declines.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
