Tesla shares dropped by 14% following a public conflict between Donald Trump and Elon Musk. The stock had previously surged after the 2020 presidential election due to investor optimism that Trump would support Musk’s ventures. However, the recent spat highlights the potential damage Trump could inflict, particularly if he decides to target Musk’s companies out of political retaliation.
Federal Scrutiny and Policy Shifts Threaten Musk’s Companies and Tesla’s Financial Stability
The implications extend beyond Tesla. Musk’s companies — including SpaceX, social media platform X, xAI, and Neuralink — all rely on federal contracts or are subject to regulatory scrutiny. For instance, the Securities and Exchange Commission is probing Musk’s acquisition of Twitter (now X), suggesting potential legal exposure. Trump’s statements hint at leveraging federal authority to undermine Musk, specifically by cutting off government support.
Tesla Shares Plunge 14% as Trump-Musk Feud Sparks Fears of Political Retaliation and Lost BillionsTesla’s revenue is heavily influenced by government policies. While it holds relatively few direct contracts, the company benefits from incentives like the $7,500 EV tax credit and regulatory credit sales to automakers — mechanisms likely worth billions. A JPMorgan estimate suggests losing these could cost Tesla $3.2 billion annually. Trump’s opposition to such policies, especially environmental regulations, could pose serious financial threats.
Regulatory Scrutiny Threatens Musk’s Autonomous Driving and Space Ventures Amid Political Uncertainty
Tesla’s future growth hinges on the rollout of a fully autonomous taxi service, which remains under tight regulatory scrutiny. The company’s current “Full Self Driving” system still requires human oversight, and federal agencies like the National Highway Traffic Safety Administration are investigating accidents involving FSD. A pro-Tesla administration might ease regulatory pressure, but that’s now uncertain given Trump’s shift in tone.
SpaceX has received over $21 billion in contracts from NASA and the Department of Defense, making it a critical player in U.S. space operations. While these contracts are vulnerable to political decisions, SpaceX’s unique capabilities make it hard to replace. Boeing’s failure in its recent ISS mission underlines this point. Still, SpaceX faces regulatory hurdles from NASA, the FAA, and the FCC, particularly for its Starlink service expansion, leaving it exposed to federal oversight.
