- Markets, Politics
- Tesla Market Cap Drop
- By Manohar Patil
$150 Billion Gone: The Day Tesla Stock Plunged on Political Firestorm
Tesla (TSLA) has always been a stock that commands attention, renowned for its meteoric rises and equally dramatic, albeit often temporary, declines. However, a recent single trading day saw the electric vehicle giant’s market capitalization plummet by over $150 billion, a staggering sum that underscored the immense Tesla Market Cap Drop vulnerability the company faces, especially when its CEO, Elon Musk, becomes embroiled in high-profile political controversies.
The Immediate Catalyst: A Feud Explodes
On June 5th, 2025, Tesla’s stock experienced a precipitous decline of approximately 14%, directly triggered by a heated public spat between Elon Musk and President Donald Trump. The feud ignited when Musk publicly criticized Trump’s proposed “Big Beautiful Bill,” a tax and spending bill aimed at extending Trump-era tax cuts and potentially cutting clean energy subsidies, including the $7,500 EV tax credit. Musk, who had previously served in an advisory role within the Trump administration, branded the bill a “disgusting abomination,” arguing it would exacerbate the national deficit.
Trump swiftly retaliated, publicly expressing his “disappointment” with Musk and threatening to terminate government contracts and subsidies with Musk’s companies, including Tesla and SpaceX. The exchange spiraled on social media, with Musk making provocative claims and Trump accusing Musk of having “gone crazy” and of ingratitude. This highly public and acrimonious divorce between two powerful figures sent shockwaves through the market.
Why the Massive Sell-Off? Investor Anxiety and Perceived Risk
- Political Risk to Subsidies and Contracts: Trump’s direct threat to cut government contracts and subsidies for Tesla and SpaceX struck a raw nerve. While Musk has often claimed Tesla doesn’t need subsidies, the reality is that incentives like the EV tax credit significantly influence consumer buying decisions and contribute to the company’s profitability. JPMorgan, for instance, estimated that the proposed bill could lead to a $3.2 billion annual loss for Tesla, primarily due to the potential removal of the $7,500 EV tax credit.
- CEO Distraction and Reputational Damage: Elon Musk’s intense involvement in political squabbles and his often unfiltered social media commentary frequently raise concerns about his focus on Tesla’s core business. For investors, a CEO embroiled in a public feud with a sitting or potentially future President signals significant distraction and introduces reputational risks that could affect sales and future regulatory environments.
- Regulatory Uncertainty: The prospect of a less favorable regulatory environment for autonomous vehicles and other futuristic technologies, especially if a Trump administration were to take a harder line, weighed heavily on investor sentiment. Tesla’s ambitious plans for robotaxis, for example, rely heavily on a supportive regulatory landscape.
- Exacerbating Existing Challenges: The political drama came at a time when Tesla was already facing challenges, including intensifying competition in the global EV market, particularly from Chinese manufacturers, and concerns about slowing demand in some regions. The feud simply compounded these existing pressures, leading to a more pronounced sell-off.
The Path Forward: Navigating a Politically Charged Landscape
While Tesla’s stock often demonstrates resilience and has shown signs of recovery in the days following such sharp declines, this incident serves as a stark reminder of the unique risks associated with investing in a company so closely tied to the persona and political leanings of its charismatic leader. For shareholders, navigating the future of Tesla will require not only tracking the company’s technological advancements and market performance but also closely monitoring the volatile interplay between business, politics, and the outspoken nature of Elon Musk. The $150 billion loss underscored the immediate and tangible cost of this complex dynamic.
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