Tesla CEO Elon Musk and President Trump are in the middle of a nasty break-up and it didn’t take long for Musk’s companies, including Tesla, were thrown in the middle of it like kids in a divorce.

We will focus on the real impact on Tesla’s business here, rather than its stock price, which is largely driven by sentiment, similar to a meme stock.

As Jamie pointed out in his post yesterday, Tesla’s stock surged following Trump’s election, mostly on anticipated corruption between Musk, who invested nearly $300 million to get Trump elected, and the federal government.

Now, Tesla’s stock crashed 14% yesterday following Musk turning on Trump in a very public way.

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During the post-election rise and now this drop, Tesla’s core business has remained unchanged. Its automotive business is in evident decline, while its energy business is growing, but not enough to compensate for the decrease in EV deliveries.

Investors are clinging to the hope that this time Musk is finally right about Tesla solving self-driving, even though he has been consistently wrong about it for years, and now has initiated a pivot to Tesla operating an internal ride-hailing fleet in a geo-fenced area of Austin, Texas, and helped by “heavy teleoperation.”

With this context at Tesla, and its CEO now being in a feud with the head of the US federal government and his loyalists in Congress and the Senate, how could this impact Tesla?

Branding issues

Tesla has been having major brand issues for the last few years, as its CEO has become increasingly political and they have ramped up since he became directly involved with Trump.

It led to the “Tesla Takedown” protests all around the world and Musk alienated a large part of Tesla’s customer based, who tends to lean to the left. Some argued that Tesla might managed to grab new customers to the right of the political spectrum and Trump tried to help with that by holding what amounted to a Tesla informercial on the White House lawn.

However, we have previously highlighted that Tesla has limited opportunities to bring in customers from red states and rural areas.

Now that Musk has called Trump an ingrate, insuated that he was a pedofile, and called his flagship legislation an “abomination”, all in the span of a few hours, it’s likely going to result in MAGA supporters turning away from Tesla.

Musk’s impact on the brand has had the biggest negative effect on Tesla in North America and Europe.

Tesla’s sales are on track to be down roughly 50% in Europe this year and Tesla’s market has been wiped out in Canada.

While the impact on the brand in the US is undeniable, it actually hasn’t been greatly felt on deliveries yet for a few reasons.

First off, Tesla has maintained record discounts and incentives to buy its vehicles in the US.

Secondly, the US market is the least competitive for electric vehicles worldwide. Tesla’s main competition is from other US automakers while many foreign automakers don’t bring their entire EV lineups into the US and Chinese EVs are virtually banned in the country.

Lastly, the US still has a $7,500 incentive on the purchase of new electric vehicles, which is expected to go away next – creating some urgency to buy now.

Incentives

Trump campaigned on removing the $7,500 incentive at the purchase of electric vehicles – a campaign that Musk backed with almost $300 million.

The President also attacked electric vehicles in general during the campaign with clear misinformation. Shortly after, Musk said that “Trump was right about everything.”

The plans was always to remove the EV tax credit and any incentives for renewable energy. Musk actually publicly agreed with this though he added that he thinks that subsidies for fossil fuels, which greatly outpace those for renewable energy, should also be removed.

Trump never showed any intention to do that and campaigned on the US drilling for more oils and restarting unprofitable coal power plants.

The ‘Big Beautiful Bill’ that was approved by Congress and is now being discussed in Senate is officially killing the EV tax credit, the 30% tax credit for solar, wind, and energy storage (ITC), the incentives to produce batteries in the US, and it tries to kill CARB’s ZEV credits.

Some have attributed this as the real reason why Musk turned on Trump and attacked the bill, but the truth is that Trump and the GOP had signaled all this prior, including during the campaign that Musk backed.

However, Musk has been mostly absent at Tesla for the last year, but he recently returned at Tesla and received several briefings. There’s a possibility that Musk has now grasped the full impact of the removal of all EV, battery, and solar incentives.

Without ZEV credits, the EV tax credit, the ITC, and battery manufacturing credits, Tesla would have lost money in Q1 2025.

Investigations, penalities, and bans

Many argued that the real reason Musk backed Trump was to get federal agencies investigating him and his companies off his back.

Musk and his companies have been under SEC, DOJ, NTHSA, US Labor Board, and FTC investigations.

Some of those investigations have been ramping up and once Musk got into the government, he pushed for new leaders of those agencies and gutted their resources through DOGE.

Now that he has turned on Trump, there’s a possibility that those investigations ramp back up again.

Trump has already made it clear that he plans to retaliate against Musk’s companies in a series of post on Truth Social:

In particular, the SEC could go against Musk and Tesla due to recent lies about Tesla’s demand.

NHTSA has had a long going investigation into Tesla’s Full Self-Driving program and Trump could pressure the agency to shut down its upcoming pilot program in Austin or even recall FSD features.

Electrek’s Take

I think things will cool down. The way I see it, Musk was pushed out, he realized that he doesn’t have that much control over Trump, and tested the waters to activate his plan B, which is to get Trump impeached and have him replaced by JD Vance.

He quickly realized that he doesn’t have the political weight to make that happen and backed off.

The situation is still not great and I could certainly see it escalate again. Especially since Musk signaled that he is willing to throw his weight at the political class to get what he wants:

Trump could be worried about that and decide reduce Musk’s power, which relies greatly on Tesla’s inflated stock price.

But even if nothing happens and Musk and Trump squash their beef, the truth is that Tesla is going to suffer badly from this bill.

The entire EV market is going to suffer. If the bill passes, EV are going to have a great second half of the year as buyers try to take advantage of the tax credit, but things are going to get rough in 2026.

For Tesla, I think it starts losing money in 2026. Competition is starting to crush the company in Europe and China. The US is its only market where sales are not crashing, but that’s because Tesla is willing to reduce its gross margins with discounts.

Tesla is going to have to dig deeper on that front without the tax credit. You remove the billions of dollars that Tesla has been getting for ZEV and battery manufacturing credits and it turns negative.

Ultimately, it will cripple the entire US automotive market as the rest of the world moves to electric vehicles.

Tesla has announced that it now offers interest-free loans on the Cybertruck until the end of the month. The move is the equivalent of a roughly $10,000 discount and shows that Tesla has reached a new level of desperation in trying to sell the Cybertruck.

Following the unveiling of the Cybertruck in 2019, Tesla reported having accumulated over 1 million reservations for the highly anticipated electric pickup truck.

However, after launching the production version in 2023 at almost twice the price and with less range than previously announced, the vehicle program became a total flop.

Tesla had planned for a production capacity of 250,000 vehicles per year at Gigafactory Texas, and CEO Elon Musk said that he could see the automaker doubling to half a million trucks per year.

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However, Tesla ended up having issues selling 40,000 Cybertrucks in its first year, and the delivery rate fell even further in 2025 with inventories piling up.

To address the demand issues, Tesla began throttling down production earlier this year and offering deeper discounts on its new vehicles.

Today, Tesla announced its biggest Cybertruck discount yet: 0% APR financing for those who order the truck with its $8,000 Full Self-Driving Package:

As we recently reported, Tesla has virtually given up on delivering Autopilot on Cybertrucks – pushing many buyers toward its more expensive FSD package.

Now, Tesla is doubling down on the strategy by subsidizing financing with FSD.

The automaker has already been offering 0% financing in Model 3 and cheaper financing on Model Y, but it is going to be quite costly on the more expensive Cybertruck.

At a cost of $88,000 (Cybertrcuk Dual Motor plus FSD), it should cost Tesla about $10,000 in loss revenue to subsidize the loans at the current rate.

Inventory trackers indicate that Tesla’s Cybertruck inventory in the US exceeds 3,700 units, valued at over $300 million.

The fact that Tesla is extending this offer only through June 30th points to the automaker trying to reduce its inventory by the end of the quarter.

Electrek’s Take

It looks like Tesla is delivering the Cybertruck at an annual rate of about 25,000 units in its second year of production – down from ~40,000 units in its first year.

There’s no way to put it nicely: this is a commercial flop.

It’s especially bad when you consider that Tesla prepared for a production of 250,000 units per year.

Let’s see how successful a 0% APR promotion is. I’m sure it would have a positive impact, but I doubt it will help increase the annualized rate to more than 30,000 units.

Tesla stock dropped over 50 points today, primarily in response to a very public feud between Tesla CEO Elon Musk and convicted felon Donald Trump.

But, as we pointed out in November, this doesn’t have anything to do with company performance, and rather only reflects a change in the market’s expectation of potential benefit to Tesla from government corruption.

Tesla stock has had a wild few months, with big rises and falls that has had little to do with company performance (which is, perhaps, nothing new for the stock, which has always been a speculative vehicle).

Much of the movement of TSLA has been centered around CEO Elon Musk’s relationship with Donald Trump.

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Musk very publicly supported Mr. Trump’s run for president, giving hundreds of millions of dollars in bribes to Mr. Trump’s campaign, despite the latter’s openly anti-EV positions (and despite that there exists a clear legal remedy stopping insurrectionists from holding office in the US).

Musk even went on to spew climate denying nonsense alongside Mr. Trump during the campaign, and later said nothing when Mr. Trump opposed the Paris Agreement, even though he previously opposed a similar move in 2017.

This led to Musk being invited into an advisory role, which was dubbed the Department of Government Efficiency despite it not being a real government department, and having a supposed mission redundant with the already-existing Government Accountability Office.

And in the immediate aftermath of the election, TSLA stock rose swiftly, purely because of expectations of corruption. But after that swift rise, it gradually fell as the reality of economy-destroying tariffs, anti-EV legislation, and Tesla’s brand perception problem due to Musk’s actions all became apparent. Despite Musk’s position as a top republican party donor, the party still seems more interested in catering to its traditional base in the fossil fuel industry.

Despite some recovery from that big post election rise-and-drop, TSLA took another big hit today, and it’s all due to the current rift forming between these two egomaniacs.

A rift over spending becomes something greater

During his tenure in his advisory position, Musk claims to have saved the government hundreds of billions of dollars, but independent accounting has shown that it is in fact likely to increase the deficit, not decrease it.

Nevertheless, it seems like Musk was fooled into believing his own propaganda, and into thinking that deficit reduction was ever a goal of Mr. Trump, despite that he previously oversaw the highest nominal deficit of any person in the history of the United States.

At least, he believed that until now. In the last few days, after leaving his advisory position, Musk has loudly opposed the new republican budget bill, which he now correctly points out will add trillions of dollars to the US deficit (as any lucid person might have predicted from the party of waste).

The criticism came to a head today, with Musk going through one of his patented tweetstorms, acting more like a jilted lover than a CEO in charge of a company that has many people’s retirement invested into it.

There’s been a lot of back and forth, but over the course of the day, Musk has posted many statements about how dangerous the budget bill will be for the US debt and deficit.

Mr. Trump responded, stating that Musk should have known these things before now, but that Musk is only acting this way because he cut the “EV mandate.”

To be clear, the bill in question does not cut any EV mandate, as there was never an EV mandate to begin with, but it does cut EV tax credits which Tesla has gained more benefit from than any other company, though Tesla lobbied in support of these cuts. The bill does not cut support for oil and gas companies, which are orders of magnitude higher than the support EV companies get.

In response to this, Musk claimed that he personally swung the election in favor of the republicans, and that Mr. Trump is showing “ingratitude” by not recognizing this fact.

Mr. Trump responded by suggesting that the government could save money by terminating all of the subsidies and contracts for services with Musk’s various companies. To this, Musk said that he would immediately decommission the Dragon capsule, which has been the main spacecraft used by NASA to service the International Space Station.

Then, Musk went on to state that a recession will happen in the second half of this year due to Mr. Trump’s position on tariffs, and also to accuse Mr. Trump of being on Jeffrey Epstein’s list (which is not the first time Musk has publicly accused someone of pedophilia, though it is the first time he’s said that about someone who he claimed to “love as much as any straight man can,” and knowingly worked alongside), and to agree with a call for his impeachment.

The market sees this as a negative sign

The public rift seems to have shaken the stock market out of its stupor, as Tesla went down more than 50 points since the start of today.

While nothing significant has changed for Tesla’s business today – it’s still suffering from falling sales in an otherwise rising market, and it still has a bad CEO – what has changed is the possibility of the company benefitting from corruption.

As I stated during TSLA’s meteoric post-election rise, the stock price was merely a reflection of the market’s expectation that Mr. Trump, a person with an enormous history of corruption, would thank Musk for his election participation by rewarding him and his companies. Nobody quite knew how that might happen, but everyone expected that it would.

I claimed, at the time, that this was unlikely to turn out the way the market thought it would, because the republicans would likely continue to favor fossil fuels, and that regulatory blockages were not the thing holding Tesla back from its automation goals.

Musk did attempt to use the government in corrupt ways, as detailed this week in a report by Senator Warren, and as we all remember from the White House Auto Mall infomercial (remember, folks, “everything’s computer!“).

But none of that was ever going to justify the addition of hundreds of billions of dollars to Tesla’s market cap.

The market seems to be realizing that more today, as over $100 billion has been shaved off of Tesla’s market cap since the start of the feud. That’s quite a lot of priced-in expected benefit that has been wiped away, all by a single tweetstorm.

Fight shows how vulnerable Tesla is to Musk’s whims

While it’s all well and good to see the worst two people you know fighting each other, and to finally see the inevitable fallout between two narcissists who frankly held out much longer than any reasonable person thought they would, this fight does show the significant vulnerability that Tesla has to the whims of a CEO who has shown poor ability to control his impulses in the past.

The last year or more has been highlighted by several poor business decisions by Musk, not the least of which is his support of one of the larger anti-EV entities on the planet right now.

But beyond the politics, his leadership has still been erratic for the company. Not only has he paid more attention to the many other companies he runs, when he has turned his attention to Tesla, it hasn’t been positive for the company.

After mostly ignoring Tesla for a few years, he went through a flurry of activity in the run-up to last year’s shareholder advisory vote on his compensation package. This flurry involved firing everyone including important leadership and successful teams, canceling an all-important affordable car project (and lying about it) and holding Tesla’s AI projects hostage while shifting both resources and staff from Tesla to his private AI company, even as he claims that AI is the future of Tesla.

Now, TSLA investors have another thing to worry about – whether Musk will continue to try to “poke the bear” and get more government opposition to his company, even as he continues to make himself distasteful globally (by, for example, showing support for German neo-Nazis, agreeing with a defense of Hitler’s actions in the Holocaust, or his many other white supremacist statements). These actions have driven protests against the company, embarrassed owners and pushed many customers away – and those protesters aren’t planning on stopping.

While some may cheer this new rift that has formed between Musk and one of the environment’s greatest enemies, Donald Trump, it seems unlikely that Musk’s erratic behavior will be beneficial for Tesla the company in the long run.

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