Tesla Inc. (TSLA) has become an unfortunate casualty of the escalating public feud between its CEO, Elon Musk, and U.S. President Donald Trump, suffering a staggering $380 billion erosion in its market capitalization since the beginning of 2025. This dramatic downturn positions Tesla as one of the year’s worst-performing large-cap stocks, highlighting the profound impact that high-profile political spats can have on corporate valuations and investor confidence.
The catalyst for this significant financial setback appears to be a direct consequence of a bitter public exchange between Musk and Trump. What began with Musk’s vocal criticism of Trump’s proposed tax-and-spending bill rapidly devolved into a no-holds-barred verbal duel, playing out across social media platforms. Trump, in turn, retaliated by threatening to revoke crucial government contracts and subsidies for Musk’s various ventures, including Tesla and SpaceX.
The immediate fallout was stark. On a single trading day, Tesla’s shares plummeted by over 14%, wiping out approximately $150 billion in market value – reportedly the company’s biggest single-day loss on record. This plunge has sent shockwaves through the market, with short sellers alone pocketing nearly $4 billion from the downturn.
Analysts and market observers point to several factors contributing to Tesla’s precarious position. Beyond the direct threat of government contract cancellations, the political crossfire has exacerbated existing challenges for the electric vehicle giant. Slower global EV demand, coupled with growing concerns over Musk’s increasingly contentious political leanings and ties to various groups, have already chipped away at investor sentiment.
At the start of 2025, Tesla proudly ranked as the eighth most valuable company globally. However, the relentless erosion of its market capitalization, now down by nearly 30% to approximately $917 billion, has seen it slip to the cusp of falling out of the top ten.
The controversy surrounding Musk’s political involvement has been a double-edged sword for Tesla. While his initial alignment with the Trump administration in late 2024 sparked some optimism among investors, leading to a temporary surge in share price, the current animosity has proven far more detrimental. Studies have even indicated a shifting perception of the Tesla brand among consumers, with a notable decline in consideration among Democrat-identifying buyers.
The proposed tax bill, which has been a point of contention for Musk, includes provisions that could eliminate the $7,500 federal tax credit for electric vehicle purchases by late 2025. JPMorgan estimates that such a move could strip Tesla of an estimated $1.2 billion in annual profit, further compounding the financial pressures.
While there have been reports of White House aides attempting to de-escalate tensions and arrange a call with Musk to broker peace, the damage to Tesla’s valuation for 2025 appears substantial. The incident serves as a potent reminder for investors about the inherent risks when the personal politics of influential CEOs become inextricably linked with the fortunes of their companies. For Tesla, a company already navigating challenges in a competitive EV market, the current political turbulence adds an unpredictable and costly layer of uncertainty. The road ahead for Tesla, it seems, will continue to be as volatile as the political landscape its CEO navigates.