Tesla's Crossroads: Can the Stock Withstand the Musk-Trump Fallout?

The escalating feud between Elon Musk and President Donald Trump has thrown Tesla's regulatory and financial stability into sharp relief. As Congress debates Trump's “One Big Beautiful Bill Act,” which seeks to slash federal EV subsidies and tighten eligibility for healthcare programs, Tesla's stock has faced volatility—dropping 14% in June alone. But beneath the political noise lies a critical question: Is Tesla's current valuation a buying opportunity, or does it mask existential risks tied to regulatory reversals and investor sentiment?

Regulatory Risks: The Subsidy Sword of Damocles

The BBB Act's threat to Tesla's bottom line cannot be understated. The bill would eliminate the $7,500 federal EV tax credit by 2026—a benefit that accounted for $1.2 billion in Tesla revenue in 2024—and impose a $250 annual fee on EV owners. JPMorgan estimates this could reduce Tesla's U.S. sales by 10% annually. Meanwhile, California's regulatory credit program, which generates $2.8 billion annually for Tesla by selling emissions allowances to other automakers, is under attack. If repealed, Tesla could lose up to $2 billion in revenue.

The Senate's pending amendments offer a sliver of hope. A compromise proposal would extend the tax credit for automakers below 200,000 sales—a temporary reprieve for Tesla—but the BBB's Medicaid cuts and deficit concerns remain a legislative battleground. If passed, the bill's $2.4 trillion debt increase could trigger broader fiscal austerity, further squeezing EV incentives.

Market Realities: Beyond the Political Theater

While the Musk-Trump feud dominates headlines, Tesla's fundamentals remain a mixed bag. On one hand, its global sales resilience—driven by China and Europe—supports a $21.1 billion Q1 2025 revenue. The Cybertruck, despite its unpopularity, is now rolling off assembly lines, and the Shanghai plant's efficiency keeps costs in check. Tesla's battery tech and autonomous software (FSD) also retain long-term value, even as competitors like BYD and GM's Ultium platform close the gap.

On the other hand, Tesla's operational challenges persist. Supply chain bottlenecks, $2.37 billion in potential legal fines (Autopilot lawsuits, racial harassment claims), and declining U.S. sales (-15% in Q1) add pressure. The BBB's $250 annual EV fee would disproportionately hurt Tesla's high-end market, while China's $50 billion EV subsidies fuel fierce competition.

Valuation: A High-Risk, High-Reward Crossroads

Tesla's current valuation—around $200 per share—reflects a discount to its 2021 peak, but investors must weigh near-term risks against long-term potential. Bulls argue that Musk's political leverage (e.g., his role in the Department of Government Efficiency) and Tesla's EV dominance will weather subsidy cuts. A détente with Trump, hinted at in backchannel talks, could see Senate amendments delaying tax credit phaseouts.

Bears counter that the BBB's passage would erode Tesla's U.S. margins, while global competitors exploit regulatory gaps. The stock's volatility—down 14% in June—may not fully price in the Senate's uncertain timeline.

Investment Takeaways: Proceed with Caution

• Buy the Dip? If the Senate softens the BBB's EV provisions, Tesla could rebound, especially if it stabilizes U.S. sales and executes its $7 billion cost-cutting plan (targeting a 18% margin by late 2025). A price below $160 might offer value, but set a stop-loss at $140 to guard against legislative overreach.
• Wait for Clarity. Investors with shorter horizons should avoid aggressive positions until the Senate votes on the BBB. A full passage could push the stock toward $130.
• Long-Term Play. Tesla's innovation pipeline (robotaxis, 4680 battery scale-up) and Musk's disruptive vision justify a multiyear hold, but only if investors can stomach political and operational risks.

Final Analysis

Tesla's stock sits at a critical crossroads. While its technology and global scale remain unmatched, the Musk-Trump feud has exposed vulnerabilities tied to federal subsidies and regulatory goodwill. For now, the BBB's fate is the key variable: a compromised bill could validate current prices, but a hardline passage would demand a steeper discount. Investors must decide whether Tesla's growth story can outpace the political storm—or if this is the moment to bet against its ability to thrive without government largesse.

In the end, Tesla's resilience may depend less on Musk's Twitter rants and more on whether its cars—and its bottom line—can outrun the BBB's shadow.