Elon Musk and Trump Clash Sparks Tesla Stock to Drop Sharply

Post by : Bianca Suleiman

Photo: AFP

Tesla’s stock dropped a lot after Elon Musk and President Donald Trump started arguing publicly. The two powerful men exchanged strong words, and this fight worried many people.

Trump said he was “very disappointed” because Musk criticized his important tax law. Musk responded on social media, saying without him, Trump would have lost the election. Later, Trump said he might stop government contracts and subsidies for Musk’s companies, and claimed he asked Musk to leave his administration. Musk said this was not true.

Musk also said he would stop using a SpaceX spacecraft that the US government uses.

Because of all this, Tesla’s shares fell 14% in one day, which was the biggest drop since March. This lost Tesla about $150 billion in market value. After the market closed, the stock dropped even more.

Once, Musk and Trump worked closely. Musk gave over $250 million to help Trump try to win the presidency again. Trump even put Musk in charge of a big plan to reduce government spending. But Musk quit that role last week.

Ross Gerber, a CEO of a company that owns Tesla shares, said Musk’s behavior could hurt Tesla and SpaceX. He warned that Musk’s actions might cause lawsuits and cut SpaceX’s value in half. Gerber said Musk is not acting in the best interest of Tesla’s investors.

This fight makes people worry that Trump might use his power to punish Musk’s companies, like he has done with others he sees as opponents. It also raises questions about whether Trump’s government will pass rules Musk wants, like laws to make it easier to use self-driving cars — something very important for Tesla’s future.

Trump’s new tax law would remove a $7,500 tax credit for buyers of Tesla and other electric cars by the end of this year, which is much earlier than planned. This could cost Tesla about $1.2 billion in profit for the year, according to experts at JPMorgan.

After Musk left his government advisory role, he has been working hard to stop this tax law, calling it a “disgusting abomination.” He has been asking Republican lawmakers, including House Speaker Mike Johnson, to keep the tax credits for electric cars.

Another Senate law that challenges California’s rules on electric cars could cause Tesla to lose $2 billion more from selling regulatory credits.

Together, these laws could reduce half of the $6 billion Tesla is expected to earn this year before paying interest and taxes, experts say.

Tesla did not reply to requests for comments on these issues.

The tax bill passed by the House also plans to end clean energy tax credits early and puts tough rules on using parts from China. Experts say these changes would make the credits almost useless and hurt companies like Tesla.

Tesla’s solar and battery division said that stopping these clean energy incentives suddenly would hurt America’s energy independence and power reliability.

Most of these clean energy and electric car rules were created under President Joe Biden’s Inflation Reduction Act. This law encourages companies to build batteries and electric cars in the US by giving them more money if they produce more here. Tesla has many US factories for cars, batteries, and lithium refining.

Thanks to these policies, electric car sales in the US grew 7.3% last year, reaching a record 1.3 million vehicles, according to data from Cox Automotive.