Tesla (TSLA) Plunges 6.94% as Musk's Political Move Sparks Investor Fears

On July 7, 2025, Tesla's stock experienced a significant drop of 6.94% in pre-market trading, reflecting investor concerns and market reactions to recent developments.

Tesla's CEO, Elon Musk, announced the formation of a new political party, "America Party," on the social media platform X. This move has sparked considerable debate and uncertainty among investors, leading to a sharp decline in Tesla's stock value. The announcement has raised questions about Musk's focus and the potential impact on Tesla's business operations and market position.

Investors have expressed frustration with Musk's political involvement, which has led to a sense of exhaustion and concern about the company's future direction. The formation of the new political party has been seen as a distraction from Tesla's core business, potentially affecting its ability to innovate and compete in the electric vehicle market.

Tesla's recent financial performance has also been a source of concern. The company's second-quarter delivery figures for 2025 showed a 13.5% year-over-year decline, indicating challenges in maintaining growth momentum. Additionally, the cancellation of electric vehicle tax credits in the "Big and Beautiful" bill is expected to impact Tesla's profitability by approximately $3.2 billion annually.

The company's brand image has also taken a hit, with consumer sentiment towards Tesla declining. Stifel data indicates that Tesla's net favorability rating has dropped from 9% in January 2024 to 3% in the current period. This shift in consumer perception has led to a significant decrease in sales, particularly in Europe, where Tesla's market share has been eroded by competitors.

Tesla's reliance on government subsidies and carbon credits has also become a point of contention. The company's financial health is closely tied to these external factors, and any changes in policy could have a significant impact on its bottom line. This dependency has raised concerns about Tesla's long-term sustainability and its ability to navigate a changing regulatory landscape.

Despite these challenges, Tesla remains focused on its autonomous driving and robotaxi projects as key drivers of future growth. However, the commercialization of these technologies remains uncertain, and their success will be crucial for Tesla's ability to regain investor confidence and stabilize its stock price.