Elon Musk’s new party spooks investors: Tesla shares fall 7% as political move revives Donald Trump feud; stock slumps 35% since December peak

Tesla shares fell nearly 7% in premarket trading on Monday after CEO Elon Musk’s surprise launch of a new US political outfit, the "America Party", reignited investor concerns over his focus on the electric vehicle maker’s future.The announcement came Saturday from Musk, who previously led the now-defunct Department of Government Efficiency (DOGE), and was accompanied by criticism of President Donald Trump’s legislative agenda—specifically the ‘One Big, Beautiful Bill’. The move escalates an already public feud between Musk and Trump, which resurfaced in June after Tesla posted its second straight quarterly drop in vehicle deliveries, Reuters reported.That decline prompted a series of social media spats, including a threat from Trump to cut off Tesla’s government contracts and subsidies."Investors are worried about two things – one is more Trump ire affecting subsidies and the other, more importantly, is a distracted Musk," said Neil Wilson, UK investor strategist at Saxo Markets, quoted Reuters.In May, shareholders had welcomed Musk’s decision to scale back political donations and commit to leading Tesla for another five years.

The billionaire had previously spent nearly $300 million backing Trump’s 2024 re-election campaign.“But now (they) are worried he’s going to get sucked back in and take his eye off Tesla,” Wilson added.Investor unease surfaced shortly after Musk’s party announcement, with Azoria Partners delaying the launch of a Tesla exchange-traded fund. Azoria CEO James Fishback criticised the political move on X, urging Tesla’s board to assess whether Musk’s political involvement aligns with his duties as CEO.

“The new party undermines the confidence shareholders had that Musk would be focusing more on the company,” Fishback said.Wedbush analyst and long-time Tesla bull Dan Ives said many investors now feel a “sense of exhaustion” over Musk’s continued political immersion.Trump also weighed in Sunday, calling the America Party “ridiculous” and warning that Musk’s influence over NASA, a position he once supported, could present a conflict of interest given SpaceX’s ties to government contracts.Board under pressureMusk’s latest political turn has renewed scrutiny of Tesla’s board, which has long faced criticism for its hands-off approach in dealing with its outspoken CEO, who concurrently runs five other companies.“This is exactly the kind of thing a board of directors would curtail—removing the CEO if he refused to curtail these kinds of activities,” said Ann Lipton, professor of business law at the University of Colorado.

“The Tesla board has been fairly supine... and it’s difficult to imagine they would begin now.”Tesla board chair Robyn Denholm had in May denied reports that directors were exploring a CEO replacement. But with rising trade tensions, slowing sales, and an aging vehicle line-up, the board may face growing calls to act.Tesla shares have dropped 35% since peaking above $488 in December following Trump’s re-election. The stock closed last week at $315.35, making it the worst performer this year among the "Magnificent Seven" group of top US tech stocks.