Rising Tensions Between Musk and Trump Threaten Tesla’s Stability
The dissolution of the alliance between Elon Musk and Donald Trump has raised concerns over Tesla's market position and financial outlook.
Following Donald Trump's election victory in November, many investors viewed Tesla as one of the principal beneficiaries of a Trump presidency.
However, this perception has shifted dramatically as the previously strong alliance between Musk and Trump appears to be crumbling, exposing Tesla to heightened risks.
Tensions, which had been simmering over Trump's tax and spending policies, escalated into a public spat that significantly impacted Musk's market valuations and the future of critical government contracts.
Trump has indicated the possibility of revoking government contracts and subsidies for both Tesla and Musk's SpaceX, further stressing the relationship.
In response, Musk controversially threatened to retire a SpaceX aircraft utilized by the U.S. government, only to retract his statement later that same day.
Amid these developments, Tesla's stock has seen a staggering decline of 29.3% this year, reducing the company's market capitalization to approximately $917 billion, a loss of about $400 billion, marking one of the largest declines among global companies.
The situation intensified further when the public exchanges between Musk and Trump became evident, with Tesla's market value plummeting by over $150 billion within hours of their Thursday confrontation, which also resulted in a $34 billion drop in Musk’s personal wealth.
Additionally, the valuation of Destiny Tech 100, an investment fund with a significant stake in SpaceX, fell by 13% following the turmoil.
In Europe, while overall electric vehicle sales have increased, Tesla's market share saw a drastic reduction of 50% in April, drawing attention away from its operations to Musk’s political engagements.
A recent study by Morgan Stanley highlighted that 85% of investors believe Musk's political activities have a detrimental effect on his companies.
Dan Ives, an analyst at Wedbush and a long-time Tesla optimist, characterized the feud as reminiscent of “middle school squabbles,” noting the unsettling transformation of Trump from a major supporter into a potential adversary for Musk and Tesla.
The implications extend beyond mere support, as Republican policy proposals could jeopardize billions of dollars in Tesla’s earnings.
Specifically, the potential passing of legislation that would eliminate a $7,500 tax credit for buyers of certain Tesla models and other electric vehicles could cost the company as much as $1.2 billion in annual profits, according to JPMorgan estimates.
However, this perception has shifted dramatically as the previously strong alliance between Musk and Trump appears to be crumbling, exposing Tesla to heightened risks.
Tensions, which had been simmering over Trump's tax and spending policies, escalated into a public spat that significantly impacted Musk's market valuations and the future of critical government contracts.
Trump has indicated the possibility of revoking government contracts and subsidies for both Tesla and Musk's SpaceX, further stressing the relationship.
In response, Musk controversially threatened to retire a SpaceX aircraft utilized by the U.S. government, only to retract his statement later that same day.
Amid these developments, Tesla's stock has seen a staggering decline of 29.3% this year, reducing the company's market capitalization to approximately $917 billion, a loss of about $400 billion, marking one of the largest declines among global companies.
The situation intensified further when the public exchanges between Musk and Trump became evident, with Tesla's market value plummeting by over $150 billion within hours of their Thursday confrontation, which also resulted in a $34 billion drop in Musk’s personal wealth.
Additionally, the valuation of Destiny Tech 100, an investment fund with a significant stake in SpaceX, fell by 13% following the turmoil.
In Europe, while overall electric vehicle sales have increased, Tesla's market share saw a drastic reduction of 50% in April, drawing attention away from its operations to Musk’s political engagements.
A recent study by Morgan Stanley highlighted that 85% of investors believe Musk's political activities have a detrimental effect on his companies.
Dan Ives, an analyst at Wedbush and a long-time Tesla optimist, characterized the feud as reminiscent of “middle school squabbles,” noting the unsettling transformation of Trump from a major supporter into a potential adversary for Musk and Tesla.
The implications extend beyond mere support, as Republican policy proposals could jeopardize billions of dollars in Tesla’s earnings.
Specifically, the potential passing of legislation that would eliminate a $7,500 tax credit for buyers of certain Tesla models and other electric vehicles could cost the company as much as $1.2 billion in annual profits, according to JPMorgan estimates.