Tesla Stock Faces Turbulence Amid Political Moves by Elon Musk
Elon Musk’s recent political ambitions have unsettled Tesla investors, leading to a significant drop in the company’s stock. As Musk challenges former President Trump’s policies and proposes a new political party, concerns grow over the impact on Tesla’s financial outlook.
On Monday, Tesla’s (TSLA) stock fell more than 7% as CEO Elon Musk’s political activities stirred controversy. This decline follows Musk’s weekend poll on X, where he suggested forming the “American Party” to combat the current political landscape. Musk criticized Trump’s bill, claiming it fails to address the deficit and offers little public benefit.
“By a factor of 2 to 1, you want a new political party and you shall have it!” Musk declared. “Today, the America Party is formed to give you back your freedom.”
The ongoing tension between Musk and Trump, which previously seemed to have eased, resurfaced with this latest development. Trump responded on Truth Social, expressing disappointment in Musk’s decision to venture into politics. “I am saddened to watch Elon Musk go completely ‘off the rails,’ essentially becoming a TRAIN WRECK over the past five weeks,” Trump commented.
Musk’s public disapproval of Trump’s bill has also impacted Tesla’s business operations, including SpaceX. Investors, already weary from previous battles, are now grappling with the stock’s decline. Wedbush analyst Dan Ives noted, “Very simply Musk diving deeper into politics and now trying to take on the Beltway establishment is exactly the opposite direction that Tesla investors/shareholders want him to take.”
Trump’s bill also affects Tesla’s financials, with the elimination of the Electric Vehicle (EV) mandate, which Musk opposed. “It is a Great Bill but, unfortunately for Elon, it eliminates the ridiculous Electric Vehicle (EV) Mandate,” Trump stated on Truth Social.
Furthermore, the expected expiration of the $7,500 EV tax credit on September 30 poses a significant challenge for Tesla and other automakers like GM and Ford. This expiration impacts demand and threatens a vital revenue stream for Tesla: sales of regulatory credits.
William Blair’s Jed Dorsheimer emphasized the financial implications, explaining that changes in standards reduce fines for non-compliance, thus diminishing demand for Tesla’s credits. Tesla’s revenue from selling credits amounted to $2.8 billion in 2024, representing a notable portion of its gross profit.
Dorsheimer further detailed, “We estimate that 75% of Tesla’s regulatory credit revenue is related to the CAFE standards, which we account for in our model from the third quarter of this year and zero out in 2027,” resulting in a substantial impact on Tesla’s profitability.
In response to these challenges, Blair and Dorsheimer downgraded Tesla’s stock to Market Perform from Outperform. They anticipate that the effects of the bill will pressure Tesla’s market momentum and valuation.
Original Story at finance.yahoo.com