Shares of Tesla, the electric vehicle company led by Elon Musk, have seen a significant decline of over 14%, leading to a loss of approximately $US150 billion ($230 billion) in market valuation. Investors are concerned that Musk’s ongoing conflict with former US President Donald Trump may negatively impact the company.
The downturn in Tesla’s share price follows a public disagreement between Musk and Trump regarding the US budget bill. Musk claimed Trump benefited from his support during the election, to which Trump responded that he might leverage government resources against Musk’s companies, including Tesla and SpaceX.
In a post on his platform, Truth Social, Trump suggested that terminating Musk’s government subsidies would be an effective way to save money in the budget, noting he was surprised Biden hadn’t acted on this previously. Investors are anxious about the implications of Trump’s potential retaliation against Musk, particularly in the realm of autonomous vehicles, which are crucial for Tesla’s future.
Market experts, like Dan Ives of Wedbush Securities, have indicated that Trump might retaliate if he perceives Musk as obstructing his legislative agenda. This concern has caused a reversal in Tesla’s fortunes, especially after a recent rally linked to Musk’s announcement of a driverless taxi service testing in Austin, Texas.
The uncertainty surrounding Trump’s stance on self-driving vehicle regulations has raised alarms, as much of Tesla’s growth is tied to the advancement of this technology. Market analysts believe that if the regulatory landscape becomes more restrictive due to political tensions, it could delay Tesla’s ambitious plans for robotaxis, which Ives has noted are intended to expand to various cities next year.
Additionally, while the focus is on Tesla, Trump’s threats appear to extend to SpaceX, Musk’s rocket company, which relies heavily on government contracts for NASA missions. SpaceX is currently developing a massive rocket aimed at lunar exploration.
Musk’s relationships have also been beneficial for his satellite service, Starlink, which has seen approval for aviation and maritime use in Saudi Arabia, among other markets. Despite the political backdrop, companies like SpaceX have continued to secure contracts in several countries.
Historically, Tesla shares benefitted from Musk’s alliance with Trump, peaking shortly after the latter’s election. However, amidst Musk’s involvement with government budget cuts, Tesla’s reputation faced challenges, leading to fluctuations in share value. Tesla’s stock has made a comeback following Musk’s recent assertions of intention to refocus on the company’s core automotive business and technology advancements.