Economic clash or political feud?

The conflict between Donald Trump and Elon Musk has entered more complex and sensitive stages. This feud has directly impacted Tesla’s stock, causing concern among its shareholders. 

On the other hand, Elon Musk, with his revelations about Trump, shows no intention of backing down from this battle! 

On Thursday, Tesla’s stock plummeted 14%, as President Donald Trump threatened to cancel government contracts for companies led by CEO Elon Musk. 

This move slashed Tesla’s market value by $152 billion, marking the largest blow to its market value to date. Tesla’s market capitalization fell below $1 trillion (to $916 billion) for the first time, signaling a new crisis for the stock.

Trump wrote on Truth Social: “I told Elon (Musk) to go. He was forcing everyone to buy electric vehicles, and I repealed that mandate. That’s what drove him crazy.”

Trump’s remarks were met with a response from Musk, who even threatened to make further revelations about hidden dealings and significant archived files concerning the U.S. President. Musk wrote on X: “Without me, Trump would have lost the election, Democrats would have taken control of the House, and Republicans would have been 51 to 49 in the Senate.”

Musk, the world’s richest man, has recently threatened to create a crisis for lawmakers who support this bill in next year’s congressional midterm elections. Musk considers the bill “disgusting” and has strongly opposed it.

The decline in Tesla’s stock value follows a 22% surge in May despite weak sales figures, after which Musk concluded his tenure as the so-called head of the Department of Government Efficiency (DOGE). Shareholders viewed Musk’s return to Tesla’s office as hopeful news, but the recent conflicts with Trump indicate that things are not unfolding as Tesla shareholders had hoped! 

Overall, Tesla’s stock has dropped nearly 18% this week, as Musk continues to oppose the budget bill. Additionally, this year, the stock has fallen about 30%, significantly below its peak of $488.54 on December 18, 2024.

Walter Isaacson, Musk’s biographer, said on CNBC’s “Squawk Box” on Thursday: “One of Elon’s traits is that when he dives in with all his heart, he never backs down.”

This statement suggests that the Musk-Trump feud is unlikely to end soon unless the U.S. President backs down against Tesla’s CEO. This would be the worst possible scenario for Trump and the Republicans.

According to NBC, Musk has tried to persuade Trump and other Republican government members to amend aspects of Trump’s bill that limit electric vehicle and residential solar tax credits (which benefit Tesla). The bill also imposes a new annual $250 fee on electric vehicle drivers. Alongside the escalating feud, Tesla faces more fundamental challenges, including declining electric vehicle sales in key European markets and a loss of brand credibility.

Tesla is also under pressure to launch a long-delayed driverless ride-sharing subscription service this month. Musk has stated that Tesla is testing autonomous vehicles in that market, but its main competitor, Waymo, is already operating a large commercial robotaxi service in collaboration with Uber there.