Elon Musk’s announcement of a new political party has caused Tesla’s shares to drop nearly 7%, wiping over $68 billion off the company’s market value.
The “America Party” aims to contest “just 2 or 3 Senate seats and 8 to 10 House districts,” with Musk stating it would be “enough to serve as the deciding vote on contentious laws, ensuring that they serve the true will of the people.” However, investors are concerned that Musk’s political focus distracts from Tesla’s core business during a critical period.
Earlier this year, Musk was involved with the Department of Government Efficiency (DOGE) and worked closely with President Donald Trump, a move that some felt risked Tesla’s reputation.
After Musk left DOGE in May, Tesla’s stock recovered somewhat, but his renewed political ambitions have unsettled investors again.
“Very simply Musk diving deeper into politics and now trying to take on the Beltway establishment is exactly the opposite direction that Tesla investors/shareholders want him to take during this crucial period for the Tesla story,” said Dan Ives, Wedbush Securities’ global head of technology research.
“While the core Musk supporters will back Musk at every turn no matter what, there is broader sense of exhaustion from many Tesla investors that Musk keeps heading down the political track,” he added.
Musk’s relationship with Trump has deteriorated, with Musk criticising Trump’s spending bill for increasing national debt and cutting support for renewable energy and electric vehicles. Trump called Musk’s political move “ridiculous” and said he had gone “completely off the rails.”
Tesla also faces operational challenges, reporting a 14% year-on-year decline in vehicle deliveries in the second quarter, missing expectations amid rising competition, particularly from Chinese rivals like BYD.
With Tesla’s stock already volatile, Musk’s political distractions and the company’s sales slump have heightened investor concerns. The success of Musk’s political venture remains uncertain, and Tesla’s future will depend on its ability to stay focused on innovation and market growth despite these distractions.