Elon Musk, the CEO of Tesla and SpaceX, has recently become a lightning rod for controversy. In addition to his general opposition to the tax bill, he particularly objected to the elimination of electric vehicle tax credits. This piece of legislation is projected to increase the federal deficit by $2.3 trillion, drawing criticism across the board. At the same time, Musk is growing more and more eclipsed by the Trump administration, deepening his ire. It’s rumored that Musk was especially incensed when his handpicked candidate to head up NASA had their nomination withdrawn.
The ramifications from this new political divide has ended up being painful for Tesla, causing the company’s stock to crash by $152 billion. This extraordinary slippage has cut Tesla’s once lofty market capitalization down to about $900 billion. In a string of recent posts on Truth Social, former President Donald Trump fired off an ominous warning. He has been bringing the pressure— threatening to cancel Musk’s lucrative government contracts and subsidies, the backbone of profitability for Tesla and SpaceX.
Musk’s relationship with Trump doesn’t seem to have survived the past few weeks’ worth of Tweets. None of this deterred him from quickly donating $275 million of his own fortune to Trump’s still-infant 2024 presidential campaign. Simultaneously, he spearheaded a fiscal austerity campaign named the “Department of Government Efficiency” (Doge). It was a landmark initiative to make government spending more efficient and effective. The widening divide between Musk and Trump suggests that Musk is unlikely to escape unscathed for defying the administration’s tax bill in public.
Even Tesla can’t overcome share price malaise. Unfortunately, without Musk’s significant course correction, industry analysts warn that his companies will soon pay a heavy price—for example by losing valuable government contracts or experiencing increased regulatory scrutiny. The stakes are especially high, as Musk moves to unveil a self-driving robotaxi next week in Austin. The long-awaited rollout of this product is Tesla’s only hope for near-term success and survival. To be commercially viable, it is heavily dependent on achieving public acceptance and receiving greenlighting from government regulators.
Musk’s increasingly personal battle with Musk has thrown Tesla into turmoil at a pivotal moment. The self-driving robotaxi is at the center of the company’s plans for future growth. The downside of government relations could more than offset this, posing some real hazards.