Trump and Musk were “best friends”, now they are something else. And this has consequences in the value of Tesla – and those who invest in the company are asking Musk to focus on it instead of politics
Musk cannot drop the political megaphone, even if it harms Tesla
by Allison MorrowCNN
Elon Musk’s plan to save Tesla is crumbling faster than a Spacex rocket. The plan was this: Musk, who became a fervent follower from Maga (acronym for the Donald Trump candidacy for the US presidency), would leave the political games in Washington and return to work.
Its empire was drifting without itself and, in particular, Tesla was in free fall. Investors longed for Musk’s old “Midas Touch” to revive sales and turn the company from electric vehicles into an artificial intelligence colossus to its (still high) market value.
But after all Washington CEO can be taken but Washington cannot be taken from the CEO.
Tesla is expected to announce this Wednesday – a drop already expected after months of decline revenues, the result of increasing competition in the electric vehicle market and considerable erosion of the brand’s reputation, much due to the role of Musk as Trump’s “best friend”.
Now it would be natural to imagine that if it is the CEO of a company whose sales are in sharp drop, it would want to avoid public controversies that could further weaken investors’ confidence in leadership. Or the Musk style can be followed.
This week, just a month after leaving the government’s special counselor to focus on Tesla’s recovery, Musk again dived into Washington’s political mud by launching another criticism of Trump – this time because of his budget law, accused of blowing up the deficit.
Musk called and threatened to campaign against Republicans in Congress who voted for her. Trump replied suggesting that his administration could investigate the government contracts of Musk companies. (Yes, a conversation worthy of adults…)
“What was a relationship of best friends has become a soap opera that continues to teach Tesla’s actions,” said Wedbush analyst Dan Ives – Tesla’s longtime defender – in a note sent to customers on Tuesday. “Tesla investors want Musk to focus on leading the company and set aside these political issues… Being on Trump’s black list won’t end well and Musk knows it.”
Despite remaining optimistic about Tesla, Ives has warned in recent months to the damage that Musk’s political investers have caused in the company’s image – which only aggravates the sales problem.
Prior to Wednesday’s report, analysts provided that Tesla sales would have fallen 13% from April to June, compared to the previous year. FACTSET estimated 387,000 deliveries in the quarter, compared to 444,000 in the same period of 2024. This could prove even worse than the first trimester, when Tesla registered its largest homologous drop in sales ever.
But sales are far from being Tesla’s only problem.
The company saw net profits fall 71% in the first quarter. Its stores have been the target of protests. Cybertruck was a failure. And, according to a new report released Tuesday (Electric Vehicle Intelligence Report), both Republicans and Democrats say they are less willing to buy a Tesla today than before Musk’s passage through the White House.
And, as my colleague Chris Isidore reported last month, the situation is even worse than it seems.
If we look closely at Tesla’s first trimester profits, we see that the company is losing money on what your main business should be: sell cars. In short, Tesla only made a $ 409 million profit in the last quarter thanks to the sale of 595 million in regulatory credits to other manufacturers.
But if Trump can approve yours, these credits may disappear. And this is just one of the many reasons why investors like Ives expect Musk and Trump to bury the war ax (or at least that Musk can keep his mouth closed for five minutes).
Tesla depends on these credits to maintain profitable, but also needs favorable regulations to compete with rivals such as Waymo – Alphabet’s autonomous taxis company, which is already very ahead of Tesla in this field.
Tesla’s shares, which are the basis of musk’s personal fortune, fell 37% from peak after elections, when Musk became a regular presence on sea-lag. At the time, Wall Street believed that Tesla’s problems were managing and that any negative reaction from her liberal base would be offset by the advantages of musk having influence in the White House.
And maybe it was like that – for a short time. But the disagreement between the two now worries investors, who fear that Trump decides to take revenge directly from Tesla.
As it rekindled it on Monday, Tesla’s shares fell 2%. On Tuesday, another 5%fell, out of the overall recovery of the market.
The message may finally arrive at Musk. After Trump said Doge – the Committee created by Musk to reduce federal bureaucracy – could be a “monster” that would “return to devour Elon”, Musk seemed to be contained. More or less.
“It’s so tempting to climb this. So, so tempting,” he wrote in X. “But I will abstain … for now.”
