Tesla Shares Drop as Elon Musk’s “America Party” Scares Investors Tesla Inc., one of the world’s most closely watched technology and automotive companies, had its share price take a deep plunge this week, falling over 3% as of Monday, July 7, 2025. The decline came shortly after CEO Elon Musk tweeted that he was launching a new political party the America Party a move that has left investors and analysts shocked and annoyed.
While Musk is no stranger to taking bold action, this new political foray adds more uncertainty to what has already been a wild year for Tesla. For others, it is not so much politics it is a question of Musk’s priorities, Tesla’s trajectory, and the risk of politicizing one of the world’s most innovative companies at a fragile stage of its business cycle.
A Market Reaction Rooted in Distrust
Tesla shares dropped at the Frankfurt open and added to losses in U.S. market hours after Musk tweeted he would be launching a new political party to reform the American government. The market responded almost immediately. Investors, who were already dealing with a 22% decline in Tesla’s stock this year, responded with fresh skepticism.
Musk is the brand and backbone of Tesla,” Wedbush Securities analyst Dan Ives said. “When he gets involved in political adventures, investors worry about distractions and a lack of focus on priorities.”.
In the second quarter of 2025 alone, Tesla recorded a 13.5% year-on-year drop in global vehicle deliveries, one of its poorest recent quarterly performances. This new political agenda item could divert executive bandwidth at a time when Tesla is facing considerable external pressures ranging from supply chain tension to intensifying global EV competition.
What is the “America Party”?
The America Party, announced by Musk on July 5 via a social media poll, appears to be a libertarian populist-flavored political startup. The party’s initial announcements are that it will focus on:
- Reducing the national deficit
- Enacting pro-natalist policies to reverse negative birth rates
- Modernizing the military with AI and automation
- Advancing deregulation and free-market principles
Although the party is not yet registered with the Federal Election Commission (FEC), Musk has indicated he’ll be backing America Party candidates in future Congressional and Senate races.
What’s particularly delicate about this move is that Musk’s companies Tesla and SpaceX, are intimately connected to federal contracts and subsidies. That reality makes any foray into American politics risky, particularly when it places him in conflict with established power centers.
Trump Fires Back
Former United States President Donald Trump did not take Musk’s political entrance lightly, as the Republican Party standard-bearer and 2024 presidential aspirant.
Calling the America Party “ridiculous,” Trump openly scoffed at the viability of a third-party candidacy in America’s two-party system. He also questioned Musk’s growing presence in both business and government, citing the creation of a conflict of interest between Musk’s SpaceX multibillion-dollar NASA contracts, and his political ambitions.
The battle has since escalated, with Trump labeling Musk a “train wreck” and implying that Tesla and SpaceX might face more regulatory heat or lose future government support if Musk becomes too active politically.
Investor Sentiment Turning Cautious
Investor sentiment in Tesla was already strained before Musk’s political announcement. The company is grappling with many problems in its core business operations:
Loss of EV tax credits: Tesla is no longer qualified for the $7,500 federal EV tax credit under the new fiscal law approved by Congress. This puts domestic sales at risk, particularly to price-conscious buyers.
Increasing competition: Chinese companies like BYD and Xiaomi are gaining traction in the EV space with cheaper, tech-savvy alternatives.
Disappointing deliveries: Tesla’s Q2 2025 worldwide deliveries fell short of Wall Street’s expectations, adding to broader worries over slowing growth.
Now, with Musk appearing increasingly mired in political combat, questions about Tesla’s future leadership and strategic direction are growing louder.
Dan Ives spoke directly: “There’s a level of fatigue among investors. They invested in a visionary CEO, not a presidential candidate.”
What This Means for Tesla’s Stock and Future
In the short term, Tesla’s stock might continue to be volatile. Though Tesla still dominates the EV industry, the future of the company is tied to Musk’s reputation. Any suggestion of instability or distraction on his part can be translated directly into market losses.
Political forays also entail longer-term risks that go beyond stock prices:
Regulatory retaliation: Both the Biden and Trump camps can retaliate against a politically active Musk, especially when federal contracts or subsidies are involved.
Consumer sentiment: Musk’s polarizing personality may impact Tesla’s brand reputation, especially among young, progressive, or apolitical consumers.
Board tensions: As Musk ramps up his political ambitions, Tesla’s board may be forced to act or clarify expectations around governance—especially with a history of shareholder lawsuits and SEC scrutiny.
Can Business and Politics Mix?
Elon Musk has long walked the thin line between entrepreneur and provocateur. Whether it’s smoking marijuana on live streams, fighting regulators on Twitter, or fighting short-sellers on Wall Street, his flair for disruption has characterized the Tesla narrative.
Playing politics even in the form of independent reform is a risk that can destabilize the core business. Unlike Twitter (now X), which was a bit of a passion project, Tesla is shareholders’ money, long-term bets on renewable energy, and a massive worldwide workforce. And many now question whether Musk can do both jobs without one being compromised.
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