Tesla shares fell sharply on Thursday as U.S. President Donald Trump publicly feuded with Tesla’s billionaire CEO Elon Musk, who calls himself his “number one best friend.”
Investors watched the unfolding drama and became increasingly worried about what the spat might mean for Musk’s business empire. With no other news about the company, the automaker’s shares closed down 14% on the day, wiping out $150 billion (approximately Rs. 1,28,621 crore) in market value.
Traders sold Tesla in massive trades after Musk quickly responded to Trump’s criticism with social media posts that ramped up criticism of the president’s tax bill. Trump fired back further, saying Musk was upset because the bill eliminated tax incentives for buying electric vehicles.
A public feud with Trump could create multiple obstacles for Tesla and other members of Musk’s vast business empire. The U.S. Department of Transportation oversees vehicle design standards and has a large say in whether Tesla can mass-produce robotaxis without pedals and steering wheels.
The agency is also investigating Tesla’s driver-assist software, known as Full Self-Driving, after the fatal crash.
“Elon’s political views continue to hurt the stock,” said Tesla shareholder Dennis Dick, chief strategist at Stock Trader Network. “First, he aligned himself with Trump, which unnerved many potential Democratic buyers. Now, he’s turning on the Trump administration.”
Musk last year refocused Tesla’s future around self-driving robotaxis as electric car sales declined. On an earnings call last year, he said investors “should sell their Tesla stock” if they don’t believe the company can solve the technical challenges of self-driving cars. Wedbush analysts said the artificial intelligence and autonomous driving opportunities alone could bring the company a market capitalization of $1 trillion (approximately Rs 85,73,329 crore).
Musk has advocated for a federal approval process for self-driving cars to simplify the current patchwork of state regulations.
Tesla investor Gerber Kawasaki Wealth & Investment Management CEO Ross Gerber said the feud with Trump has “negatively impacted Tesla” and could jeopardize regulation and risk more government investigations.
“Every benefit that he could have had is now a negative,” Gerber said.
Musk, the world’s richest man and a key figure in DOGE’s cost-cutting program for months, lashed out at Trump’s “big beautiful bill” this week as he decided to reduce his time in the White House to focus on his companies. Following Thursday’s sell-off, his net worth fell by about $27 billion (roughly Rs. 2,31,557 crore) to $388 billion (roughly Rs. 3,327.31 billion), Forbes reported.
“The easiest way to save billions of dollars in our budget is to end Elon’s government subsidies and contracts,” Trump said Thursday on his Truth social platform.
Transportation Secretary Sean Duffy has moved to waive some safety requirements for autonomous vehicles, and the National Highway Traffic Safety Administration (NHTSA) said in April that it was “actively working to develop a multi-faceted regulatory framework for autonomous vehicles.”
While the federal government has begun streamlining some regulations around self-driving, Morningstar analyst Seth Goldstein said regulators may enact rules specific to Tesla.
For example, most self-driving car companies use sensors such as radar and lidar to detect objects, but Tesla relies solely on cameras.
Goldstein said federal regulators may enact rules requiring lidar, which would hurt Tesla. “For President Trump, getting on his bad side always carries the risk of personal retaliation,” Goldstein said. Still, he doubted that outcome was possible because many other companies have been pushing for new regulations for years.
The stock has been on a roller coaster ride since Musk endorsed Trump’s re-election bid in mid-July 2024, rising 169% from then until mid-December. Subsequently, as the “Tesla Removal” protests intensified, the stock price fell 54% as of early April. Musk’s leadership of DOGE and his alliance with the Trump administration have deterred some car buyers, with sales in key U.S. markets such as Europe, China and California falling sharply.
The House version of Trump’s budget bill proposes essentially ending the popular $7,500 (roughly Rs. 6.43 lakh) electric vehicle subsidy by the end of 2025. Tesla and other automakers have relied on incentives to boost demand for years, but Trump pledged during the transition period to end subsidies.
JPMorgan said Tesla’s annual profits could take a hit of $1.2 billion (about Rs 10,290 crore), plus an additional $2 billion hit from regulatory credit sales due to separate Senate legislation targeting California’s electric vehicle sales mandate.
The company remains the world’s most valuable automaker. As of Wednesday, Tesla’s market capitalization was about $1 trillion (approximately Rs 85,73,329 crore), much higher than Toyota Motor’s $290 billion (approximately Rs 24,87,019 crore).
“A lot of people were excited about Tesla because the political winds were in his (Musk’s) favor. And now the political winds have turned into headwinds in a lot of different ways,” said Steve Sosnick, chief strategist at Interactive Brokers.
Tesla’s price-to-earnings ratio is 150 times profit expectations, much higher than other large technology stocks such as Nvidia.
“I’m short Tesla. I don’t understand it. I don’t understand its valuation. I don’t understand its fundamentals. I think it’s overstated,” said Bob Doll, chief investment officer at Crossmark Global Investments.
© Thomson Reuters 2025
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