NEW YORK: On Thursday, Tesla stocks plummeted as President Donald Trump engaged in a public dispute with the company's billionaire CEO, Elon Musk, who refers to himself as the "First Buddy." Investors observed the developing situation with increasing concern over what the upheaval might signify for Musk's business ventures. The automaker's stock closed the day down 14 per cent, erasing $150 billion in market value without any other news regarding the company. Traders sold off Tesla in significant trading volume after Musk swiftly reacted to Trump's critiques with social media messages that intensified criticism of the president's tax legislation. Trump retaliated, claiming Musk was agitated due to the legislation eliminating tax incentives for electric vehicle acquisitions.
Publicly clashing with Trump may create several obstacles for Tesla and Musk’s extensive business network. The U.S. Transportation Department oversees vehicle design standards and would significantly influence Tesla's ability to produce robotaxis in large quantities without pedals and steering wheels. The agency is pursuing an inquiry into Tesla's driver-assistance technology, referred to as "Full Self-Driving," after a deadly accident. La política de Elon sigue perjudicando las acciones. Initially, he partnered with Trump, causing frustration among numerous possible Democratic purchasers. “Now he has switched to the Trump administration,” stated Tesla investor Dennis Dick, chief strategist at Stock Trader Network.
With EV sales declining, Musk has shifted Tesla's future focus towards self-driving robotaxis in the past year. During an earnings call last year, he advised investors to "sell their Tesla stock" if they doubted the company's ability to overcome the technological hurdles of self-driving cars. According to Wedbush analysts, the market value of AI and autonomous opportunities for the company might reach $1 trillion. Musk has promoted a unified federal approval process for self-driving cars to simplify the existing complex array of differing state regulations. Ross Gerber, CEO of Tesla investor Gerber Kawasaki Wealth and Investment Management, stated that the conflict with Trump "presents a negative influence on Tesla," which could threaten regulations and increase government scrutiny. "All the advantages he thought he would gain have now become drawbacks," Gerber stated.
Musk, the wealthiest individual globally and a significant player in the Department of Government Efficiency's (DOGE) budget-reduction strategy for months, criticised Trump's "big beautiful bill" this week, after opting to dedicate less time to the White House and concentrate more on his businesses. After Thursday’s market decline, his net worth dropped by approximately $27 billion to $388 billion, as reported by Forbes. On Thursday, Trump stated on his Truth Social platform that the "simplest method to conserve funds in our Budget, saving billions and billions, is to end Elon’s government subsidies and contracts." Transportation Secretary Sean Duffy has initiated exemptions for autonomous vehicles from certain safety regulations, while NHTSA stated in April it is "actively working on creating a comprehensive regulatory framework" for these vehicles.
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Even though the federal government has begun to simplify certain regulations regarding autonomous driving, Morningstar analyst Seth Goldstein noted that regulators could potentially create rules that target Tesla specifically. Many companies in the autonomous vehicle sector employ sensors like radar and lidar for object detection, whereas Tesla depends exclusively on cameras. Goldstein mentioned that federal regulators could create regulations mandating lidar, which would disadvantage Tesla. "According to Goldstein, being on President Trump's unfavourable side often poses the danger of facing personal revenge." He was sceptical that such a result was probable, however, since numerous other companies have been advocating for new regulations for years.
The stock has experienced wild fluctuations since Musk supported Trump in mid-July 2024 for his re-election campaign, rising 169 per cent from that moment until mid-December. This was succeeded by a 54 per cent drop by early April as a "Tesla Takedown" demonstration escalated. Musk's direction of DOGE and his connection with the Trump administration discouraged some car purchasers, resulting in decreased sales in Europe, China, and crucial U.S. regions such as California. The House of Representatives version of Trump's budget plan suggests mostly eliminating the favoured $7,500 EV tax credit by the conclusion of 2025. Tesla and various car manufacturers have depended on incentives for years to boost demand, but Trump vowed during the transition to eliminate the subsidy.
According to J.P. Morgan, Tesla may confront a $1.2 billion decline in its yearly profit, plus a further $2 billion loss in regulatory credit sales because of distinct Senate legislation aimed at California's electric vehicle sales requirements. The company remains the most valuable car manufacturer globally by a significant margin. As of Wednesday, Tesla's market capitalization was approximately $1 trillion, significantly higher than Toyota Motor's $290 billion. Many individuals were enthusiastic about Tesla due to the favorable political climate supporting him (Musk). "And now they've transformed into challenges in numerous ways," stated Steve Sosnick, chief strategist at Interactive Brokers. Tesla is valued at 150 times projected earnings, significantly higher than other major tech companies like Nvidia. "I have taken a short position on Tesla." I can't grasp it. I find its valuation unclear. I don't grasp its basic concepts. "I believe it's receiving too much attention," said Bob Doll, chief investment officer at Crossmark Global Investments.
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