Tesla's Board Faces Pressure to Rein in Elon Musk Amid Sluggish Sales and Distracted Leadership

Tesla's stock has declined this year due to slowed sales and concerns about CEO Elon Musk's focus on outside interests. Investors wonder if the board will intervene to rein in Musk's activities.

Tesla's (TSLA) stock has experienced a sharp decline this year, primarily due to slowed sales and growing concerns about CEO Elon Musk's focus on outside interests. The company's shares dropped over 7% on July 7, 2025, following a tumultuous weekend that included Musk's announcement of a new political party and the repeal of key electric vehicle (EV) incentives [1].

Musk's political maneuvering has been a significant distraction for the company. On Saturday, he announced the formation of the "America Party," stating that the U.S. operates under a one-party system rather than a democracy [1]. Market analysts, such as Dan Ives of Wedbush, have expressed concern that Musk's political involvement is detracting from Tesla's core business. Ives warned, "Musk diving deeper into politics is exactly the opposite direction that Tesla shareholders want him to take" [1].

The repeal of the $7,500 federal EV tax credit after September 30, 2025, also dealt a significant blow to Tesla. The law not only eliminates the federal tax credit but also ends zero-emission vehicle (ZEV) credit sales, a key revenue source for Tesla [1]. This change is expected to lead to a short-term boost in Q3 sales as buyers rush to qualify for remaining credits, but analysts predict a sharp drop in U.S. sales after October, especially for models heavily reliant on the incentive [1].

Tesla's international position is also under pressure. China's Xiaomi YU7, a new crossover, began deliveries on Sunday with over 200,000 pre-orders in minutes, posing a direct threat to the Tesla Model Y [1]. Additionally, Xiaomi's SU7 sedan is already outselling the Model 3 in China, and Tesla's European market share continues to erode amid newer, cheaper competitors [1].

Tesla's stock fell 6.6% to $292.85 in early trading on July 7, breaching the July 1 support level of $293.21, raising the risk of a deeper correction [1]. Key watch points include $273.21 as the next support level and potential base-building if shares stabilize above $285 [1].

Investors are closely watching several factors to gauge Tesla's near-term outlook. These include Musk's ability to refocus on the core business, Tesla's ability to maintain margins without ZEV credits, the progress of the robotaxi rollout, and the company's ability to fend off competition from Xiaomi and other competitors [1].

The recent clash between Musk and Dan Ives of Wedbush has further highlighted the tension between Musk's political involvement and Tesla's business performance. Ives warned that Musk's political activities could cost the company around $1 trillion in autonomous vehicle opportunities [2]. While Ives' note urged the Tesla board to set "ground rules" for Musk's political activities, Musk responded by telling Ives to "shut up" [2].

Despite the turmoil, Musk is likely to continue playing a key role in Tesla. Analysts argue that while Musk's political involvement may be detrimental to the company's performance, he is not going anywhere [3]. The Tesla board will need to carefully navigate Musk's political activities and ensure they do not detract from the company's core business.

References:
[1] https://www.fingerlakes1.com/2025/07/07/tesla-stock-today-july-7-2025/
[2] https://www.investors.com/news/technology/tesla-stock-elon-musk-wall-street-analyst/
[3] https://fortune.com/2025/07/08/tesla-musk-political-limits-dan-ives-three-steps-board/