June 7, 2025:— Tesla shares bounced back on Friday following a bruising selloff that erased $152 billion in market value, sparked by an escalating feud between CEO Elon Musk and former U.S. President Donald Trump. However, prospects for a truce between the tech billionaire and the political heavyweight remain uncertain, casting a long shadow over the electric vehicle maker’s future.
Tesla stock (NASDAQ: TSLA) rose nearly 4% in Friday’s trading, partially recovering from Thursday’s dramatic 14% plunge—the company’s biggest single-day loss in over a year. The steep drop followed a public war of words between Musk and Trump over proposed changes to federal tax incentives that could severely impact electric vehicle (EV) sales.
The clash centered on Trump’s new tax and spending proposal, which includes a provision to eliminate the popular $7,500 federal EV tax credit by the end of 2025. Musk, a vocal proponent of EV adoption, criticized the plan on his social media platform X, calling it “regressive and shortsighted.” Trump responded by threatening to review federal contracts with Musk’s companies, including rocket firm SpaceX and tunnel developer The Boring Company.
The political drama roiled markets and intensified scrutiny of Musk’s increasingly polarizing role in U.S. public life. A report by Politico on Thursday had suggested that Trump and Musk might hold talks to defuse the tension, citing unnamed sources close to both men. Musk himself signaled openness to dialogue, responding positively to calls for reconciliation from X users.
But hopes for a détente dimmed on Friday when Trump, speaking to CNN, dismissed the idea of reconciliation. “I’m not even thinking about Elon,” the former president said. “He’s got a problem.”
For Tesla investors, the feud raises alarms beyond just personality clashes. “It might be a bit too hopeful to think their relationship will ever go back to what it once was,” said Matthew Britzman, an equity analyst and Tesla shareholder at Hargreaves Lansdown. “But if cooler heads prevail and the tension eases, that would definitely be a big improvement for Tesla.”
Risks to the Business
The implications of Musk’s rift with Trump could extend far beyond stock volatility. Tesla’s business model—and Musk’s broader industrial ambitions—remain deeply intertwined with government policy.
The U.S. Transportation Department, for instance, plays a crucial regulatory role in approving advanced autonomous vehicles like the robotaxis Tesla plans to deploy. These vehicles would operate without traditional steering wheels or pedals, a concept that has already drawn scrutiny from federal safety officials.
A hostile administration could also affect lucrative federal contracts. SpaceX, Musk’s privately held aerospace company, is one of NASA’s key contractors and provides launch services to the U.S. Department of Defense. Any perceived instability in Musk’s relationship with federal regulators or the White House could complicate future contract negotiations.
“An open clash with Trump could pose multiple hurdles for Tesla and the rest of Musk’s sprawling business empire,” said Evan Roth Smith, a political strategist and co-founder of Slingshot Strategies. “What’s particularly dangerous is the potential erosion of support from both political camps.”
Brand at Risk
Tesla’s valuation remains elevated by most standards. Despite a year-to-date decline of 26.9%, the stock still trades at roughly 120 times expected earnings—an aggressive multiple even by the standards of tech giants like Nvidia. That lofty valuation reflects investor optimism about Tesla’s long-term potential in autonomous driving, energy storage, and artificial intelligence.
But Musk’s increasingly political persona may be undermining consumer sentiment. After aligning with Trump last year and backing his White House bid, Tesla briefly surged as investors bet on deregulation and increased market support from conservative buyers. However, sales have softened amid mounting backlash from progressive consumers, and now, Musk risks alienating Republican supporters as well.
“With Musk alienating Republicans, there is no one left to prop up consumer sentiment towards Tesla,” said Smith. “That could lead towards a full-scale collapse in brand perception.”
Tesla has not commented publicly on the feud or its potential impact. Repeated requests for comment from the company went unanswered as of Friday evening.
Outlook
While Friday’s share price rebound provides temporary relief for Tesla investors, the longer-term outlook remains clouded by political uncertainties. Musk has shown no signs of backing away from the political fray, and Trump appears equally uninterested in reconciliation.
With the 2026 presidential race already heating up, Tesla may find itself increasingly entangled in partisan battles. For a company that once prided itself on innovation and climate leadership, the current turmoil represents a stark departure from its original mission.
“Investors will have to brace for more volatility,” said Britzman. “This is no longer just about cars or technology—it’s about navigating a deeply divided political landscape.”
Until either Musk or Trump changes course, Tesla’s fortunes may be as unpredictable as its CEO’s next tweet.
