Tesla shares decline after Elon Musk announces plans to create a new political party, sparking concerns about potential distraction and damage to the brand's reputation.

Tesla shares fell 7% after Elon Musk announced plans to form his own political party, sparking concerns about further distraction from his role as CEO. Musk's involvement in politics has alienated some investors and damaged the company's reputation, with a 22% decline in shares this year and a 71% profit plunge in Q1. Musk's latest move suggests he is not backing down from a high-profile role in Washington.

Tesla's stock price fell by 7% in early trading on Monday following Elon Musk's announcement over the weekend that he has formed a new political party, dubbed the "America Party." The electric vehicle company's shares dipped to $293 per share, marking a significant decline for the company.

Musk's decision to form a new political party comes after a contentious split with President Trump. The tech billionaire had threatened to create a new political party if the president's massive policy and spending bill passed. Musk made good on his promise on Saturday, a day after Trump signed the bill into law on July 4. In a statement on X, Musk declared, "Today, the America Party is formed to give you back your freedom."

The announcement has sparked concerns among investors about Musk's continued involvement in politics, which has previously led to a decline in Tesla's stock price. Musk's support for Trump's presidential campaign and his endorsement of far-right politicians in Europe have alienated liberal customers, contributing to a 22% decline in Tesla shares this year and a 71% plunge in the company's profits during the first quarter.

Dan Ives, a Wedbush analyst, commented, "Very simply, Musk diving deeper into politics and now trying to take on the Beltway establishment is exactly the opposite direction that Tesla investors/shareholders want him to take during this crucial period for the Tesla story" [1].

Musk's latest move into politics comes at a critical time for Tesla. Sales of the company's electric vehicles fell by more than 13% from April to June compared to the same period last year. Additionally, sales across Europe plummeted by almost 50% in April, despite the overall growth in the electric car market in the region [2].

President Trump responded to Musk's announcement on Truth Social, calling him a "TRAIN WRECK" and stating that he had gone "completely 'off the rails'" [1]. Musk has not provided details on the steps he has taken to form the new political party, which is a complex process requiring compliance with state and federal laws.

Investors are worried that Musk's political activities could further distract him from his role as CEO, potentially harming Tesla's business operations and financial performance. The company's reputation has already been damaged by Musk's involvement in the Trump administration, which he joined as the head of the Department of Government Efficiency, or DOGE. Musk announced he would step back from the administration in late May.

References:
[1] https://www.cbsnews.com/news/tesla-stock-price-down-america-party-elon-musk/
[2] https://www.bostonglobe.com/2025/07/07/business/tesla-stock-dives-elon-musk-plans-new-political-party/