Tesla Stock Falls as Trump Slams Musk’s New Political Party
- Admin
- Jul 7
- 2 min read
Tesla shares fell sharply on Monday, dropping as much as 7.6% in premarket trading, after CEO Elon Musk announced plans to form a new political party prompting a fiery backlash from President Donald Trump, who accused Musk of going “off the rails.”
By mid-morning, Tesla’s stock (TSLA) had recovered slightly but remained down 6.5%. The sell-off reflects growing investor unease over Musk’s increasing involvement in politics, which many fear could distract him from steering the company through an already challenging business climate.
Trump Blasts Musk’s Political Move
The stock drop followed Musk’s weekend announcement of the creation of the “America Party”, a new political movement aiming to disrupt the current two-party system. Trump responded forcefully on his Truth Social account Sunday night, calling Musk’s decision “ridiculous” and warning it would create “disruption and chaos.”
“I’m saddened to watch Elon Musk go completely ‘off the rails,’ essentially becoming a train wreck over the past five weeks,” Trump wrote.
The clash comes on the heels of Musk’s criticism of Trump’s recently signed “Big, Beautiful Bill”, a sweeping tax and domestic policy package that Musk claims will explode the national deficit.
Investor Jitters Over Musk’s Focus
Market analysts warn that Musk’s return to frontline politics could spell trouble for Tesla. Neil Wilson of Saxo Markets noted that investors were initially relieved when Musk stepped back from politics, but now worry he is once again “distracted” just as Tesla faces mounting competition and declining sales.
“There’s concern that Musk will take his eye off Tesla at a critical time,” Wilson said in a research note.
Tesla’s Sales Slump and Market Woes
Tesla recently reported a 13.5% drop in Q2 vehicle sales, the worst quarterly performance in the company’s history, and its first-ever annual decline. The electric vehicle giant also risks losing its global sales crown to China’s BYD, which is expanding aggressively despite not yet entering the U.S. market.
Adding to the turmoil, Musk’s controversial stint leading the Department of Government Efficiency, where he oversaw mass layoffs, has sparked protests outside Tesla showrooms worldwide.
Musk stepped down from the government role in May, temporarily reassuring investors. However, his latest political ambitions have reignited fears of distraction at a time when Tesla needs stability.
Tesla’s Rough Year Continues
With shares already down nearly 23% in 2025, the political feud and worsening business fundamentals are compounding pressure on the company. Analysts warn that unless Musk refocuses on Tesla’s core challenges like slowing sales and fierce competition the stock could face further declines.
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