Tesla Shares Crash Over 7% After Elon Musk Political Debut With ‘American Party’
Tesla’s stock price saw a significant fall on Monday, plunging over 7%, following a surprise political announcement from CEO Elon Musk. As of 12:23 PM EDT, Tesla shares were trading at USD 292.40 on the Nasdaq stock exchange, marking a sharp 7.28% drop — one of the steepest single-day declines in recent months.
Musk Announces New Political Party While Markets Were Closed
The slide in Tesla’s value came just days after Elon Musk revealed his latest venture — the launch of a new political outfit named theAmerican Party. Musk made the announcement on Saturday via his social media platform, X (formerly Twitter), while financial markets were closed for the weekend.
In his post, Musk sharply criticized the current U.S. political establishment, stating: “When it comes to bankrupting our country with waste & graft, we live in a one-party system, not a democracy. Today, the America Party is formed to give you back your freedom.”
Trump Reacts: Ridicule and Threats
Former ally and U.S. President Donald Trump did not hold back in his reaction. Calling Musk’s announcement “ridiculous,” Trump claimed the move would only create “confusion.”
The two influential figures have had a tumultuous relationship. Despite Musk being one of Trump’s top political donors during the 2024 election, their alliance began to fracture after Musk criticized Trump’s legislative initiatives, particularly his much-hyped “One Big Beautiful Bill,” which Musk labeled a “disgusting abomination.”
Musk argued that such policies would balloon the U.S. federal budget deficit by trillions of dollars. In retaliation, Trump reportedly threatened to halt all federal subsidies to Musk-owned companies and even floated the idea of deporting Musk from the United States — a highly controversial and legally questionable stance.
Tesla Faces Rough Roads Beyond Politics
Record Drop in Q2 Sales
Beyond the political drama, Tesla has been struggling with internal business challenges. The electric vehicle (EV) giant reported a record drop in second-quarter sales. The company sold 13.5% fewer vehicles in Q2 2025 compared to the same period in 2024.
Even more concerning, Tesla posted its first-ever annual sales decline as a publicly listed company, albeit a modest 1% decrease. For a brand that has consistently enjoyed year-on-year growth and positioned itself as the market leader in EVs, the numbers came as a surprise to analysts and shareholders alike.
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BYD Closing In Fast
Adding to Tesla’s woes is the looming threat from Chinese rival BYD. Despite not entering the U.S. market, BYD is on track to overtake Tesla as the world’s top EV manufacturer based on annual global sales. This shift signals rising global competition and a changing power dynamic in the electric vehicle space.
Protests and Public Backlash Against Musk’s Government Role
Another blow came from Musk’s own political involvement beyond founding a new party. His controversial stint as head of theDepartment of Government Efficiency, a newly established office under the U.S. administration, caused widespread uproar. He oversaw mass layoffs of federal employees, prompting protests at Tesla showrooms around the globe.
In May, Musk stepped down from this government role, sparking optimism among investors that he would refocus on running his private enterprises, including Tesla, SpaceX, and X. However, his ongoing political confrontations, especially with Trump, have kept him in the national spotlight and dragged Tesla further into turbulent waters.
Musk’s Political Journey Jeopardizes Investor Confidence
Tesla’s market performance has often been tightly linked to Elon Musk’s public persona. After the 2024 U.S. elections, Tesla shares nearly doubled, buoyed by hopes of a strong alliance between Musk and Trump. In December 2024, the company’s stock hit a record high.
But with Musk now pursuing an independent political path and feuding with Trump, investor confidence has waned. Since those December highs, Tesla shares have lost more than a third of their value, reflecting growing unease over the implications of Musk’s political ambitions.
What Lies Ahead for Tesla and Musk?
Whether Musk’s political strategy pays off or not remains to be seen, but the immediate impact on Tesla is evident. The combination of falling sales, rising competition, political uncertainty, and leadership distractions has created a perfect storm for the EV maker.
Investors will closely watch how Musk balances his role as a political figure with his duties as Tesla’s CEO. The next few months could prove pivotal in determining not only Tesla’s market standing but also Musk’s legacy in both the business and political arenas.
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FAQs: Elon Musk, Tesla Stock, and the American Party
Why did Tesla shares fall recently?
Tesla shares dropped by over 7% following Elon Musk’s announcement of a new political party, which created market uncertainty and investor concern.
What is the American Party launched by Elon Musk?
The American Party is Elon Musk’s new political initiative aimed at reforming the U.S. government system, which he claims is wasteful and undemocratic.
How is Donald Trump involved in the Tesla controversy?
Trump criticized Musk’s political move, calling it “ridiculous,” and even threatened to end federal subsidies to Musk’s companies and deport him.
Is Tesla losing its EV market dominance?
Yes, Tesla is at risk of being overtaken by Chinese EV giant BYD in global annual sales, though BYD has not entered the U.S. market yet.
Has Tesla reported any recent losses in vehicle sales?
Yes, Tesla reported a 13.5% decline in Q2 2025 vehicle sales and its first-ever annual drop in sales as a public company.
Will Elon Musk leave his political roles?
Musk stepped down from his role in the U.S. Department of Government Efficiency in May but remains politically active through the American Party.
How has the market reacted to Musk’s political actions?
The market has reacted negatively. Tesla stock has lost over a third of its value since December 2024 due to concerns about Musk’s political distractions.
Note:Article includes insights from Reuters.
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