Tesla Stock Plummets 14.26% Amid Musk-Trump Feud

On June 5, local time, Tesla's stock price experienced a significant decline of 14.26%, resulting in a market capitalization loss of over 150 billion dollars. This downturn was triggered by the publicized conflict between Tesla CEO Elon Musk and Donald Trump. The tension between the two figures escalated after Musk expressed his dissatisfaction with the U.S. Congress's fiscal spending bill, criticizing it as "disgusting" and urging lawmakers to withdraw their support. Trump responded by hinting at a potential review of the government subsidies and contracts received by Tesla and its affiliated companies, stating, "I am very disappointed, and it is hard to say how long our relationship can last."

Musk, who had previously collaborated with Trump on administrative efficiency reforms, has been a key advisor for the "DOGE" expenditure review. However, his involvement in Washington affairs has decreased since late May, and he has strongly opposed the latest fiscal legislation. The primary cause of Musk's dissatisfaction is the proposed adjustment to the electric vehicle tax credit in the budget bill. The House version suggests phasing out the 7,500 dollar federal tax credit for electric vehicle purchases by the end of 2025. This announcement led to significant institutional selling of Tesla shares.

The public confrontation between Musk and Trump has raised concerns about the broader impact on Musk's extensive business empire. The political shifts and public statements have created uncertainty, potentially affecting Tesla's market position and future prospects. Additionally, Musk's frequent changes in political stance, from supporting Trump to criticizing key legislation, have drawn criticism from both Republican and Democratic supporters.

The ongoing political tensions have put pressure on Tesla's valuation. Since the beginning of the year, Tesla's stock price has declined by 29.5%. Although the company's stock price surged by nearly 70% following Musk's summer 2022 endorsement of Trump's re-election campaign, it has since lost more than half of those gains due to protests and political controversies. The current trading price of Tesla reflects a significant premium over its future earnings expectations, trading at 140 times the projected earnings, which is notably higher than other major tech stocks.

The political dynamics in Washington could further impact Tesla's regulatory approvals and financial resources. Former White House Chief Strategist Steve Bannon has suggested that if Trump returns to government, a comprehensive review of the government contracts and subsidies received by Musk's companies should be conducted. This potential review adds another layer of uncertainty to Tesla's future, as the company navigates the complex interplay between politics and business.