Tesla Shares Plummet as Trump Targets Musk’s Government Contracts

June 6, 2025 - Tesla shares plummeted 14.41% today following reports that President Donald Trump is considering terminating federal contracts and subsidies tied to Elon Musk’s companies, including Tesla and SpaceX. The sharp market reaction stems from escalating tensions between Musk and Trump, fueled by Musk’s public criticism of a recent GOP-backed budget bill. This feud could have significant economic consequences for Musk’s business empire, which relies heavily on government support.

The Fallout: A High-Stakes Feud

The conflict began when Musk, appearing on CBS, criticized Trump’s budget bill, claiming it undermines the work of the Department of Government Efficiency (DOGE), an initiative Musk has championed. This public rebuke reportedly prompted Trump to threaten the withdrawal of federal funding for Musk-linked ventures, a move that could disrupt operations at Tesla, SpaceX, and potentially xAI.

The decision could cost Musk’s companies billions, with SpaceX facing losses of over $3 billion annually in NASA and Pentagon contracts, critical for programs like the Artemis lunar mission, and Tesla at risk of losing approximately $4.5 billion in EV buyer incentives, equivalent to $7,500 credits for about 600,000 U.S. electric vehicle purchases, plus $1.8 billion annually in battery production support. The broader impact could include reduced R&D budgets, stalled infrastructure projects, and slower technological advancements in clean energy and space exploration.

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Market Reaction and Investor Sentiment

Tesla’s stock plunge reflects investor fears that the loss of federal support could cripple the company’s growth trajectory. Analysts note that markets are pricing in the risk of Tesla losing billions in subsidies, which could have long-term repercussions. Meanwhile, SpaceX’s financial outlook is also under scrutiny. Despite projected 2025 revenues of $15.5 billion, surpassing NASA’s entire budget, only $1.1 billion comes from NASA contracts, meaning commercial operations could cushion some losses, but not entirely.

SpaceX’s Strategic Importance

SpaceX, a cornerstone of U.S. space exploration, faces unique risks. Its multibillion-dollar contracts with NASA for the Artemis program are critical for America’s lunar ambitions. Terminating these could delay missions and weaken U.S. leadership in space, raising national security concerns. The potential loss of these contracts could hinder SpaceX’s ability to deliver on its ambitious goals.

Tesla’s Vulnerability

Tesla’s reliance on federal EV incentives makes it particularly vulnerable. The potential loss of $4.5 billion in consumer tax credits could dampen demand for Tesla vehicles, already facing competitive pressures. Additionally, the $1.8 billion in battery production support is crucial for scaling Tesla’s energy storage business. Analysts warn that these cuts could slow Tesla’s expansion and innovation, impacting its position in the global EV market.

Did You Know?
In 2008, NASA awarded SpaceX a $1.6 billion contract for ISS resupply missions, a pivotal deal that saved the company from near bankruptcy and cemented its role in U.S. space exploration.

Musk’s Response and Industry Outlook

Musk has not backed down, with recent comments described as a sharp critique of Trump’s team. This defiance could escalate the conflict, potentially affecting not just Tesla and SpaceX but also xAI, which operates in a politically sensitive AI landscape. Industry observers note that Musk’s ability to navigate this crisis will depend on his capacity to mend ties with Washington or diversify revenue streams.

Broader Economic Implications

The feud’s ripple effects extend beyond Musk’s companies. Cutting federal support could slow advancements in clean energy and space technology, impacting jobs and innovation. With SpaceX’s commercial revenue outpacing NASA’s budget, the private sector’s growing dominance in space exploration is clear, but losing government backing could still hinder progress.