Tesla's Post-Football Rally: Sustained Recovery or False Dawn?

The recent stock rebound of Tesla (TSLA) following a mediated phone call between Elon Musk and the Trump administration has sparked optimism among investors. But beneath the surface, the simmering feud between Musk and President Donald Trump continues to cloud the automaker's future. With Tesla's shares down over 20% year-to-date by June 2025, the question remains: Is this rally a sign of strategic truce, or merely a temporary reprieve?

The Musk-Trump Feud: A Catalyst for Volatility
The public clash between Musk and Trump began in late May 2025 when Musk publicly opposed Trump's $4.2 trillion spending bill, calling it a “disgusting abomination” that would “crash the economy.” At the heart of the dispute: the bill's elimination of EV tax incentives for Tesla while preserving fossil fuel subsidies. Musk accused the administration of favoring traditional energy interests, a stance that resonated with environmentalists but drew Trump's wrath.

In retaliation, Trump threatened to revoke government contracts with Musk's companies, including SpaceX, which holds billions in Pentagon and NASA deals. Musk's defiant retort—“Go ahead, make my day”—turned the feud into a PR spectacle, spooking investors. Tesla shares plummeted 14% in a single day, erasing $150 billion in market cap.

The White House's subsequent intervention—a hastily arranged call between Musk and Trump—briefly stabilized shares. But the underlying tensions remain unresolved. Analysts note that while the stock has clawed back some losses, the truce feels fragile. “This isn't a reconciliation; it's a tactical pause,” said Dan Ives of Wedbush Securities. “The regulatory and political risks haven't gone away—they've just been papered over.”

Regulatory Risks: The EV Tax Credit Battle
The exclusion of Tesla from the EV tax credit in Trump's spending bill is a critical red line. The credit, which once accounted for 5–10% of Tesla's U.S. sales growth, has been replaced with subsidies for coal and natural gas. Musk's public outrage stems not just from principle but from cold math: losing the credit could cost Tesla $1 billion annually in lost sales.

The broader regulatory landscape is equally concerning. Tesla's ambitions for its autonomous ride-hailing service, which relies on government approvals for robotaxi deployment, now face skepticism. Trump's threats to “slow-walk” approvals for Musk's projects could delay Tesla's entry into markets already dominated by Waymo and Cruise.

Underlying Business Challenges: More Than Politics
Even if Musk and Trump bury the hatchet, Tesla's operational struggles loom large. In Europe, Tesla's market share has dropped by 3 percentage points in 2025 as competitors like Volkswagen's ID series and Hyundai's Ioniq gain traction. Meanwhile, delays in launching its Austin-based driverless ride-hailing service—now pushed to 2026—highlight execution risks.

Brand reputation has also suffered. A recent J.D. Power study ranked Tesla 10th in customer satisfaction among EV brands, below rivals like Rivian and Polestar. Internally, whispers of a CEO succession plan (later denied) further rattled investor confidence.

The Rebound: A Truce or a False Dawn?
The post-feud rebound—driven by hopes of a regulatory truce—is likely premature. Musk's political clout has waned since he resigned as head of the Department of Government Efficiency (DOGE) in late May. Without that perch, his influence over policy is diluted.

Moreover, Trump's base increasingly views Musk as a traitor for opposing the spending bill. A recent Gallup poll showed 62% of Trump voters support cutting ties with Musk's companies, a demographic shift that could pressure lawmakers to resist corporate leniency.

Investment Implications: Proceed with Caution
For investors, the calculus is clear: Tesla's valuation hinges on resolving both its political and operational crises. Key risks include:
- Regulatory Headwinds: If the EV tax credit exclusion remains, Tesla's U.S. sales could stagnate.
- Competitor Catch-Up: Waymo's lead in autonomous ride-hailing could lock out Tesla from high-margin markets.
- Leadership Uncertainty: Musk's all-consuming focus on Twitter/X and SpaceX may divert attention from Tesla's core.

Final Take
While the recent rebound offers a technical buying opportunity, investors should treat it as a short-term bounce rather than a buy-and-hold signal. Tesla's path to sustained recovery requires three things: a durable truce with the administration, execution on its autonomous plans, and a halt to its European sales slide. Until then, the rally is best viewed as a “false dawn.”

For now, Tesla remains a high-risk, high-reward bet—a stock where Musk's political theatrics and operational execution are inextricably linked. Proceed with caution.