Tesla shares have experienced a notable downturn, plummeting 7% from Friday’s closing price of $323.63 to $300.71 by Tuesday, a significant movement closely preceding the highly anticipated release of the company’s second-quarter deliveries report. This financial volatility is largely attributed to a recently reignited public feud between Tesla CEO Elon Musk and former President Donald Trump, casting a shadow over what was previously a period of optimism for the electric vehicle giant amidst its new robotaxi pilot in Austin, Texas.
The dip in Tesla stock signals concern among investors, particularly as Wall Street analysts anticipate a challenging Q2 for deliveries. Consensus estimates compiled by FactSet project around 387,000 vehicle deliveries, representing a substantial 13% year-over-year decline compared to nearly 444,000 a year ago. Further illustrating this cautious outlook, prediction market Kalshi reportedly forecasts an even lower figure of approximately 364,000 deliveries, underscoring the pressure on Tesla as it navigates both market expectations and external political pressures.
The catalyst for the current stock market decline and political tension traces back to Elon Musk’s renewed public criticism of the “One Big Beautiful Bill Act,” a comprehensive federal spending bill championed by President Donald Trump. Musk, leveraging his platform on X, voiced strong objections to the legislation, arguing that it would exacerbate the U.S. deficit and contribute to a rising national debt. This criticism came despite the bill’s provisions that some argue would disproportionately benefit higher-income households, while simultaneously reducing critical spending on programs like Medicaid and food assistance.
More critically for the future trajectory of Tesla, the “One Big Beautiful Bill Act” contains provisions that directly threaten the company’s core business model and future growth. The legislation proposes significant cuts to federal support for renewable energy development and aims to phase out existing tax credits for electric vehicles. According to analysis from the think tank Energy Innovation, such policy changes could diminish annual EV sales by an estimated 100,000 vehicles by 2035 and curb renewable energy development by over 350 cumulative gigawatts within the same timeframe, putting considerable pressure on both Tesla’s automotive division and its burgeoning Energy sector.
Donald Trump swiftly countered Musk’s criticisms, publicly suggesting that the tech billionaire was “upset that he’s losing his EV mandate” and hinting at the potential loss of “a lot more than that.” Trump’s remarks clearly alluded to the extensive network of federal subsidies, incentives, and government contracts that have historically underpinned many of Musk’s ventures, including SpaceX and Tesla. Data from FedScout, a federal spending research firm, reveals SpaceX has secured over $22 billion from federal government work since 2008, while Tesla has reported $11.8 billion in sales of “automotive regulatory credits” since 2015.
These automotive regulatory credits are a vital component of Tesla’s profitability, often stemming from federal and state regulations that mandate automakers sell a certain quota of low-emission vehicles or acquire credits from companies like Tesla, which typically generate an excess. The financial impact of these credits is profound: they contribute directly to Tesla’s bottom line. Notably, in the second quarter of 2024, revenue from these regulatory credit sales accounted for approximately 60% of Tesla’s net income, underscoring the significant financial leverage these government-derived incentives provide and the vulnerability exposed by potential policy shifts.
The escalating dispute between two of America’s most influential figures, Elon Musk and Donald Trump, highlights the intricate and often volatile relationship between corporate leadership, political power, and market dynamics. This incident not only illustrates the immediate financial repercussions that political feuds can have on major corporations like Tesla but also serves as a stark reminder of how deeply government policy, subsidies, and regulatory frameworks are intertwined with the success and valuation of even the most innovative and seemingly independent enterprises in the modern economy.
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