Tesla shares plummet following Trump's criticism of Musk's proposed political party and labeling him as 'deranged'
In a significant move that has sent ripples through the U.S. political landscape, Tesla CEO Elon Musk announced the formation of a new political party, the America Party, on his social media platform on Saturday. The announcement follows a poll Musk conducted on July 4, where over 65% of 1.2 million respondents supported the idea of having a new party independent of the traditional two-party system in the U.S.
The America Party's strategy is to focus on targeting 2 to 3 key Senate seats and 8 to 10 House districts, with the aim of preventing either the Republican or Democratic parties from gaining a majority in Congress. This move is intended to create a balance of power where the America Party could play a decisive role in legislative decisions.
However, the potential impact on Tesla's stock remains speculative. Musk's political activities could create both uncertainty and increased scrutiny over Tesla, as investors often react to the political involvement of corporate leaders. On the other hand, if the America Party gains traction and influences policy toward deregulation or innovation-friendly legislation, Tesla might benefit. Conversely, any political controversy linked to Musk could introduce volatility to Tesla’s stock in the short term.
The announcement provoked a response from U.S. President Donald Trump, who called it "ridiculous" and expressed concerns about potential confusion. The ongoing feud between Musk and Trump, and potential attempts to woo voters to Musk's new party, have thrust Musk back into the political arena.
The tumult surrounding Musk and Tesla has resulted in the company's shares shedding almost 23% of their value so far this year. In addition, protests have been sparked outside Tesla's showrooms worldwide due to Musk's recent involvement at the wheel of the U.S. government.
Interestingly, Tesla is poised to lose its title as the world's largest EV maker, based on annual sales, to Chinese automaker BYD, even though BYD has not yet entered the U.S. market. For the year 2024, Tesla has reported its first-ever annual decline in sales as a public company, although the drop was small, around 1%.
In May, Musk announced that he would step down from his government position, raising hopes among investors that he will have more time to work on his companies. However, the ongoing political involvement of Musk could potentially divert his attention from Tesla's operations.
Neil Wilson, a strategist at UK trading platform Saxo Markets, stated that Tesla investors are concerned about further friction between Musk and Trump leading to cuts to U.S. government EV subsidies. This concern is further heightened by Trump's Sunday post on third political parties stating they are "good for the creation of Complete and Total DISRUPTION & CHAOS."
As the America Party enters the political fray, the implications for Tesla and the U.S. political landscape are uncertain but undeniably significant. The direct effects on Tesla's stock remain speculative for now, but Musk’s political engagement is likely to be closely watched by investors and could impact Tesla's market perception.
References: [1] CNN Business. (2025, July 5). Elon Musk launches new political party. Retrieved from https://www.cnn.com/2025/07/05/business/elon-musk-america-party/index.html [2] The Verge. (2025, July 5). Elon Musk launches the America Party. Retrieved from https://www.theverge.com/2025/7/5/22629417/elon-musk-america-party-political-party-trump [3] CNBC. (2025, July 5). Elon Musk launches a new political party, the America Party. Retrieved from https://www.cnbc.com/2025/07/05/elon-musk-launches-a-new-political-party-the-america-party.html
- The America Party, led by Tesla CEO Elon Musk, plans to utilize technology and innovation-friendly policies in their political agenda, aiming to impact general news, politics, and possibly the crime-and-justice sector.
- The entrance of the America Party into the political terrain may influence the business landscape, with potential changes in policies relevant to Tesla's operations and the overall technology sector.
