Tesla drops 6% due to Musk’s political ambitions 📣

4:58 PM 7 July 2025

Tesla shares are down over 6% today following CEO Elon Musk’s announcement of founding a new political party called the “America Party.” In addition, investor confidence has been weakened by an underwhelming rollout of robotaxis with Full Self-Driving (FSD) features and lower sales data.

  • The proposed removal of the $7,500 EV tax credit in the Republicans’ new tax plan could weaken demand for electric vehicles in the U.S.

  • Growing concerns are emerging over Tesla's dependence on subsidy programs.

  • Further tension was triggered by Musk’s announcement of founding the "America Party," which drew sharp criticism from his former ally Donald Trump.

Musk’s new party

Elon Musk announced the launch of the America Party — a new political initiative aimed at challenging the dominance of the so-called “Uniparty,” referring to the establishment alliance between the Democratic and Republican parties. This marks a clear break from his former alignment with Donald Trump. The announcement was made on platform X, and the party’s main goals include fiscal responsibility, free speech, AI-based governance reform, and pronatalist policies.

Musk’s decision came after his strong criticism of Trump’s recently signed tax and spending package, which eliminated electric vehicle incentives and increased federal spending — a policy Musk labeled as “debt slavery.” Trump responded by calling Musk “out of touch with reality” and dismissing the new party as “a joke,” escalating the political conflict between them. While the long-term prospects of the America Party remain uncertain, Musk stated the immediate goal is to influence the 2026 House and Senate elections.

Unsuccessful pilot in Austin

At the heart of the issue is Tesla’s recent FSD pilot in Austin, which was intended to showcase the future of autonomous transport but instead revealed technological shortcomings. Video footage showing Teslas without radar or LiDAR swerving into oncoming lanes and braking abruptly sparked criticism and caught the attention of regulators. The National Highway Traffic Safety Administration (NHTSA) has launched a preliminary investigation, and local politicians are demanding driver intervention data — which Tesla has not yet released.

Analysts warn that expectations for FSD revenue may need to be significantly revised, as Tesla’s technology lags behind competitors like Waymo and Cruise in terms of safety and regulatory compliance. Legal risks related to the FSD program in Austin, along with rising R&D costs for both FSD and the Dojo system, are straining Tesla’s cash flow.

Tesla (D1 chart)

Tesla is currently trading nearly 40% below its December 2024 highs. Elon Musk’s political involvement is becoming an increasing concern for investors. The U.S.’s retreat from renewable energy and transport subsidies is also becoming a problem, and Musk’s conflict with Trump appears to be accelerating that trend.

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