Tesla's Crossroads: Can the EV Giant Survive the Musk-Trump Feud?

The simmering feud between Elon Musk and Donald Trump has erupted into a full-blitz public battle, with Tesla's stock bearing the brunt. On June 5, 2025, shares of Tesla plunged 14.2%, erasing $8.73 billion in market value and reigniting concerns about the company's long-term strategic risks. At the heart of this turmoil lies a clash over policy, politics, and power—a conflict that threatens Tesla's valuation and its grip on the electric vehicle (EV) market.

The Policy Quagmire

The feud began as a clash over the “Big Beautiful Bill,” a Trump-backed tax and spending package that eliminates EV tax credits and threatens to deepen the federal deficit. Musk, who once championed Trump's 2024 victory, now calls the bill a “disgusting abomination,” arguing it undermines his efforts to cut government waste as co-lead of the Department of Government Efficiency (DOGE). The bill's provisions, including the phaseout of the $7,500 EV subsidy by 2025, could cost Tesla $1.2 billion in annual profits and weaken its competitiveness against rivals like Ford and BYD, which benefit from subsidies in their home markets.

The stock's trajectory mirrors this policy battle: a 169% surge after Musk endorsed Trump in 2024 gave way to a 54% selloff by early 2025, with the feud now pushing it 25% lower year-to-date. Yet the true risk lies beyond short-term swings. The bill's cancellation of EV incentives could accelerate Tesla's loss of market share, especially in regions like Europe and China, where competitors enjoy robust government support.

The Investor Trust Divide

Musk's political entanglements have long been a double-edged sword. While his alliance with Trump initially buoyed Tesla's stock, the feud has exposed vulnerabilities. Analysts warn that Musk's focus on DOGE—where he claimed $160 billion in taxpayer savings but faced accusations of reckless spending cuts—has distracted him from Tesla's core challenges, including declining sales and rising competition.

In May 2025, Tesla's UK sales fell 45% amid industry-wide growth, while U.S. sales stagnated as buyers, particularly in Democratic-leaning regions, recoiled from Musk's far-right associations. The “Tesla Takedown” protests, fueled by his social media provocations, have further alienated potential customers.

Tesla's 15% global EV market share in 2024 now faces erosion. Ford's F-150 Lightning and BYD's cost-efficient models are gaining traction, while Musk's feud with regulators over the robotaxi project in Austin—a flagship initiative—threatens to delay its rollout, a key pillar of Tesla's valuation story.

Regulatory and Strategic Crosscurrents

The feud's fallout extends beyond policy. Trump's threats to cancel government contracts with Tesla and SpaceX could disrupt Musk's broader ambitions, from satellite broadband to space travel. Meanwhile, the Securities and Exchange Commission (SEC) is reportedly investigating Tesla's $10 billion Bitcoin purchase amid concerns over corporate governance—a reminder that Musk's personal battles increasingly bleed into his companies' operational risks.

Investment Implications: A Wait-and-See Stance

Tesla's valuation hinges on two critical uncertainties: the feud's resolution and the EV market's evolution. If Musk and Trump reach a détente, Tesla could rebound, particularly if subsidies are reinstated or the robotaxi project gains approval. However, if the feud persists and policy headwinds intensify, Tesla's 2025 valuation—already down to $1 trillion—could face further declines.

Investors should:
1. Monitor policy developments: Track the House bill's progress and any potential compromises on EV subsidies.
2. Watch Tesla's sales trends: A rebound in Q3 2025 sales could signal resilience, while further declines would validate concerns about brand alienation.
3. Assess Musk's focus: If he retreats from politics to prioritize Tesla, the stock could stabilize. A continued split focus may invite further investor skepticism.

Historical performance offers additional context. A backtest of a strategy buying Tesla shares on earnings announcement dates and holding for 20 trading days between 2020–2025 reveals mixed results: while Tesla's stock typically rose 5.55% on earnings beat days, the broader strategy delivered a CAGR of 4.16% but faced a maximum drawdown of -51.08%, underscoring volatility. Such findings align with the need for caution, as earnings-driven momentum alone cannot offset Tesla's current risks.

Conclusion: Tesla's Long Game

Tesla's success has always been tied to Musk's vision—and his ability to navigate political and market storms. The current feud, however, highlights a troubling reality: Tesla's valuation is increasingly a hostage to its CEO's personal stakes. For investors, this is a moment of reckoning. While the EV market's long-term growth remains robust, Tesla's path to dominance is now clouded by self-inflicted risks. Until the Musk-Trump feud is resolved, caution—and a close eye on regulatory and sales data—remains prudent.

The road ahead is clear: Tesla must choose between the chaos of political theater and the quiet work of building an enduring EV empire. The market will reward whichever path it takes.