Following CEO Elon Musk’s announcement to form a new political party in the United States, Tesla shares dropped almost 7% in premarket trading on Monday, rekindling doubts about his dedication to the electric vehicle (EV) manufacturer. In his announcement of the “America Party” on Saturday, Musk, the former head of the Department of Government Efficiency (DOGE), expressed his displeasure with President Donald Trump’s “One Big, Beautiful Bill.” Investors are worried about Musk’s focus on Tesla’s future, and this move coincides with an ongoing feud between Musk and Trump.
Some investors are concerned that Musk’s political venture may distract him from Tesla’s problems. This comes soon after Tesla reported a drop in deliveries for the second consecutive quarter, raising more questions about the company’s performance going forward. A number of factors, including the tense relationship between Musk and Trump and worries about Musk’s political involvement, have contributed to the decline in Tesla’s stock, which has already dropped more than 21% this year.
Investors are especially concerned about two things, according to Neil Wilson, a UK-based investor strategist at Saxo Markets: the possible impact of Musk’s conflict with Trump on government subsidies and, more importantly, Musk’s increasing diversions from Tesla’s daily business. Musk had reassured investors earlier this year that he would concentrate on Tesla for the next five years, but his recent political endeavour has raised concerns again.
In reaction to Musk’s announcement, investment firm Azoria Partners has already postponed the listing of a Tesla exchange-traded fund. Wedbush analyst Dan Ives and other Tesla bulls contend that Musk’s continued political involvement is wearing many investors out. Along with poor sales and an ageing car lineup, tensions with Trump have caused Tesla’s stock to plummet 35% from its December peak of over $488 to close at $315.35 last week.
Investors will be closely monitoring whether Musk’s focus on Tesla’s core business wanes further as he increases his political involvement, as this could have an effect on the company’s future growth.