Elon Musk’s close ties to President Donald Trump have become a double-edged sword for Tesla. While Musk’s influence in the administration has grown, Tesla’s stock price has taken a significant hit. On Tuesday, the White House South Lawn was transformed into a miniature Tesla showroom.
Musk showcased Tesla cars to highlight the company’s latest innovations. Trump promised to brand anyone vandalizing a Tesla car a “domestic terrorist” following reports of vandalism and arson attacks on Tesla cars across the country. Despite this high-profile support, Tesla shares have been floundering.
On Monday, they plummeted by 15 percent to end the day at $215 – the worst day for the stock since 2020. The shares bounced back slightly on Tuesday to $235. By Friday, they were due to open at around $240.
Tesla stock has been in freefall since its high of more than $435 in mid-December 2024. Experts attribute this decline to several factors. Robert Scott, a specialist in international economics and trade policy, points to the stock’s “extreme overvaluation.” The stock price was very high compared with the company’s profits, indicating that it was inflated relative to market fundamentals.
William Lee, chief economist at the Milken Institute, cites delays in launching new Tesla products as another key factor. “The new refresh for the Tesla Model Y continues to be delayed, and more importantly, no new models have been introduced,” Lee said. Tesla’s sales have also taken a hit in key markets.
Tesla’s stock price struggles intensify
In February, Tesla’s sales were 76 percent lower in Germany than the previous year, despite overall sales of electric vehicles being 31 percent higher. Similar declines were observed in Norway, Denmark, Sweden, and France.
Organized boycott campaigns in the United Kingdom and Portugal have also hurt Tesla’s sales. In February, Tesla sales plummeted nearly 50 percent year-on-year in China and dropped by 71 percent in Australia. Increased competition from traditional automakers and new electric vehicle companies has contributed to Tesla’s struggles.
Musk’s personal wealth is closely tied to Tesla’s stock price. His acquisition of the social media platform X (formerly known as Twitter) for $44 billion has also become a financial burden, exacerbated by advertisers pulling back due to Musk’s political activities and endorsements. His political activities, including substantial financial support for Trump’s campaign and personal appearances on Trump’s behalf, have angered some in the US, leading to protests and arson attacks at Tesla dealerships and factories.
While Trump does not have a direct role in Tesla’s current struggles, his policies and influence over Musk could have significant implications. Trump has historically opposed subsidies for electric vehicle producers and imposed tariffs on countries Tesla relies on for exports, like China—Tesla’s second-largest market. This ongoing trade war could disrupt Tesla’s supply chain and reduce its competitiveness.
Beyond financial challenges, Musk’s expanding portfolio of businesses raises concerns about his ability to lead Tesla effectively. His involvement in projects like the cryptocurrency Dogecoin, which led to a $258 billion lawsuit alleging he inflated its price through social media, adds to these distractions. Tesla’s stock decline underscores the complex interplay of market dynamics, competition, and Musk’s multifaceted ventures and political activities.
While Musk’s influence continues to grow, Tesla faces substantial hurdles in maintaining its market position and investor confidence.
Photo by Charlie Deets on Unsplash
