Tesla shares fall as growing Trump-Musk spat rattles investors

Shares fell nearly 9% on Thursday on a day otherwise devoid of news for the electric automaker, as traders dumped the stock in heavy trading after Musk stepped up his criticism of the president's tax bill.

Cracks in the relationship between President Donald Trump and Tesla CEO Elon Musk, his self-proclaimed "First Buddy", are scaring Tesla shareholders as the two fired salvos at each other in increasingly heated rhetoric on Thursday.

Shares fell nearly 9 per cent on Thursday on a day otherwise devoid of news for the electric automaker, as traders dumped the stock in heavy trading after Musk stepped up his criticism of the president's tax bill.

Trump fired back, alleging Musk was upset because the bill takes away tax benefits for electric vehicle purchases, while investors feared their souring relationship could hurt Musk's sprawling business empire.

"Look, Elon and I had a great relationship. I don't know if we will anymore," Trump said. "He said the most beautiful things about me. And he hasn't said bad about me personally. That'll be next. But I'm very disappointed."

Musk, the world's richest man and a key figure in the Department of Government Efficiency's (DOGE) cost-cutting plan for several months, has blasted the bill, after he decided to spend less time in the White House and instead focus on his companies.

On his social media platform X, Musk has called on Congress members to kill the legislation, calling it a "disgusting abomination".

"It more than defeats all the cost savings achieved by the DOGE team at great personal cost and risk," Musk, the largest Republican donor in the 2024 election campaign, said on X on Tuesday.

Musk's leadership of DOGE and his alignment with the Trump administration had put off some Tesla buyers. Sales of his EVs slumped in Europe, China and key US markets like California, even as overall electric vehicle purchases continue to grow.

Musk has slowly started to separate himself from the White House in recent weeks, stung in part by the wave of protests against Tesla.

"Elon's politics continue to harm the stock. First he aligned himself with Trump which upset many potential Democratic buyers. Now he has turned on the Trump administration," said Tesla shareholder Dennis Dick, chief strategist at Stock Trader Network.

Musk's other businesses, SpaceX and Starlink, dominate their respective markets, but have also come under scrutiny due to Musk's relationship with Trump.

Those two businesses often serve as the default choice for commercial launches and satellite internet deployment, and foreign governments have increasingly looked to Starlink, with regulatory approvals smoothed by Musk's ties.

Tesla shares are down 12 per cent since May 27, roughly coinciding with his decision to pull back from Washington activities. Losses accelerated on Thursday as 100 million shares changed hands, roughly the daily volume over the last 100 days.

The stock has been on a roller-coaster ever since Musk endorsed Trump in mid-July 2024 in his re-election bid, gaining 169 per cent from that point through mid-December. That was followed by a 54 per cent slide through early April as a "Tesla Takedown" protest intensified.

The House of Representatives version of the budget bill proposes largely ending the popular $7,500 EV subsidy by the end of 2025. Tesla and other automakers have relied on incentives for years to drum up demand, but Trump promised during the transition to end the subsidy.

Tesla could face a $1.2 billion hit to its annual profit, along with an additional $2 billion setback to regulatory credit sales due to separate Senate legislation targeting California's EV sales mandates, according to J.P. Morgan analysts.

"The budget bill contains bad stuff for Tesla with the end of the EV credits, and just generally his falling out with Trump has risks for Tesla and Elon's other companies," said Jed Ellerbroek, portfolio manager at Argent Capital Management.

Musk's public attacks have upset potential Republican Tesla buyers as well, Dennis Dick said. One White House official on Wednesday called the Tesla CEO's moves "infuriating."

The billionaire joined Senate Republican deficit hawks this week to argue that the House bill does not go far enough in reducing spending.

Overall, Tesla shares are down 25 per cent this year, including Thursday's losses. But the company is still the most valuable automaker worldwide by a long shot - carrying a market value of nearly $1 trillion, way above Toyota Motor's nearly $290 billion.

Tesla trades at 140.21 times profit estimates, a steep premium to other Big Tech stocks such as Nvidia.