Tesla shares experienced a sharp decline in early trading Tuesday, dropping over 6% and erasing nearly $7 billion from Elon Musk’s net worth, after former President Donald Trump openly threatened to cut federal subsidies benefiting Musk’s companies.
Trump’s remarks, made on his Truth Social platform, accused Musk of receiving more government aid than any individual in history and suggested that, without these funds, Tesla might be forced to shut down operations.
This escalation followed Musk’s fierce criticism of Trump’s flagship “One Big Beautiful Bill,” a massive tax and spending package currently moving through the Senate.
The bill includes provisions to eliminate the $7,500 federal tax credit for electric vehicles as soon as September 30, a move that could slash Tesla’s annual profits by over $1 billion and dramatically alter the competitive landscape for electric cars in the United States.
Will Musk’s Political Gambit Backfire on Tesla?
Elon Musk’s increasingly vocal opposition to the spending bill has transformed a policy disagreement into a high-stakes personal feud. Over the weekend, Musk labeled the legislation “completely insane and harmful” on X and threatened to launch a new political party if the bill passes.
He further warned that Republican lawmakers supporting the bill would face primary challenges, vowing to make their defeat a personal mission.
Trump’s response was swift and pointed, calling for the Department of Government Efficiency, ironically, a body Musk once led, to investigate all federal spending tied to Musk’s business empire.
The public nature of their dispute has left investors questioning whether Musk’s political brinkmanship could provoke regulatory retaliation or the withdrawal of lucrative government contracts and incentives.
Did you know?
Tesla’s reliance on government incentives is not new: since its founding, the company has received billions in state and federal support, including a $465 million loan from the Department of Energy in 2010 that was instrumental in launching the Model S.
Tesla’s Stock Faces Unprecedented Volatility
The fallout from the feud has been immediate and severe for Tesla’s market performance. The company’s stock has fallen more than 20% in 2025, with the latest drop pushing shares below $300 for the first time in three weeks.
The timing is especially sensitive, as Tesla is set to report quarterly delivery figures, with analysts already projecting a 13% year-over-year decline amid softening demand and growing backlash against Musk’s leadership.
Wall Street analysts warn that the ongoing feud has created a “soap opera” atmosphere, which has put a damper on Tesla’s near-term prospects.
Investors are increasingly wary that the Trump administration could adopt a more aggressive stance, targeting Musk’s government contracts and scrutinizing regulatory approvals critical for Tesla’s future innovations, including its robotaxi and cybercab initiatives.
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Government Scrutiny and the Future of Tesla’s Subsidies
At the heart of the dispute is the question of whether Tesla can thrive without the billions in state and federal support it has historically received.
Data shows that Musk’s companies have benefited from more than $20 billion in government contracts and at least $2.8 billion in direct subsidies, with Tesla’s business model heavily reliant on incentives for electric vehicles and renewable energy.
The new spending bill’s proposed elimination of the EV tax credit could immediately impact Tesla’s bottom line, potentially reducing annual profits by $1.2 billion.
If Trump’s threats to investigate and claw back subsidies materialize, the risks could extend far beyond Tesla, affecting SpaceX and other Musk ventures that depend on federal partnerships.
Investor Confidence Remains on Edge
The deepening rift between Trump and Musk has introduced an unprecedented level of uncertainty for Tesla shareholders.
While some analysts expect the situation to stabilize in the coming days, the broader concern is that political volatility and regulatory risk are now embedded in Tesla’s valuation.
With the S&P 500 rising 5% since the feud began and Tesla shares down 13% over the same period, the contrast underscores how much Musk’s personal battles are weighing on the company’s prospects.
As Tesla prepares to release its quarterly earnings, all eyes are on whether the company can reassure investors and weather the political storm.
The outcome could set a precedent for how government scrutiny and political feuds shape the future of America’s most prominent tech innovators.
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