Tesla Stock Drops 22% Year-to-Date Amid Musk's Political Moves

Elon Musk's first half of 2025 was marked by significant political vulnerability. His advocacy for the Department of Government Efficiency (DOGE) revealed that the media landscape is largely controlled from the top down. This activism mobilized political forces against him, leading to street-level violence aimed at devaluing Tesla, his most prized asset. Despite the FBI forming a task force to counter attacks against Tesla car owners, a portion of the judicial system appeared aligned with political networks, as seen in the dismissal of charges against a Tesla vandal in Minneapolis. These events prompted Musk to exit the political sphere to protect the Tesla brand, signaling the end of his alliance with Trump and muting potential political mobilization.

Musk's recent announcement of the "America Party" has raised questions about Tesla's political engagement. The America Party, formed to "give you back your freedom," operates in a political climate where the two-party system is entrenched due to the first-past-the-post electoral system. This system incentivizes voters to strategize to prevent wasted votes, creating a polarization feedback loop that makes it difficult for third parties to gain traction. However, the America Party could serve as a leverage mechanism, influencing the political landscape by acting as a mobilizing funnel for ideas and activist organizations. This could potentially unseat Republican lawmakers in the next midterm elections, providing Musk with greater leeway to improve Tesla's branding loyalty, provided that Tesla's fundamentals remain strong.

Tesla's future is heavily reliant on its full self-driving (FSD) rollout, first announced in 2016 and officially launched in October 2020. After costly setbacks with the Cybertruck and market share shrinkage in the EU against Chinese EVs, Tesla's prospects now hinge on its FSD advantage. The real-world test case for the robotaxi service began in Austin, Texas, but has faced challenges, including accidents that have prompted the U.S. National Highway Traffic Safety Administration (NHTSA) to gather more information. The limited robotaxi rollout in Austin is a mixed bag, with each error potentially amplified for ideological reasons. Long-term statistics will determine the robotaxi's error rate, and if a trend of lowering the error rate is observed, it could build public trust in FSD. Ultimately, if FSD is proven robust, it could significantly boost Tesla's sales and justify Cathie Wood's exposure to TSLA stock.

Analysts have warned that the formation of the America Party represents a "tipping point" in the Tesla story, suggesting that the Tesla Board should set ground rules for Musk's political ambitions. This would be prudent, even if the America Party acts as a leverage mechanism. Musk should have professional consultants to anticipate public reactions to his political moves. Tesla's stock performance has been volatile, with a 3% drop over the week and a 22% negative performance year-to-date. The stock is currently priced at $294 per share, below the average price target of $313.50. Analysts are divided between holding and buying, with 11 analysts suggesting it is a selling price point. Tesla's exposure remains highly speculative, driven by Musk's persona and the uncertainty around FSD's robustness.