- Trump-Elon fallout
- Why does this matter to Elon Musk?
- Tesla staring at a $3.2 billion loss?
- Elon Musk-Trump: The High-Profile Controversial Alliance
- What's Next for Tesla?
A fiery public feud between Elon Musk and Donald Trump, ignited a dramatic sell-off of Tesla stock on June 5th. This clash included Trump deriding Musk with "Trump derangement syndrome," Musk tweeting that Trump would have lost the election without him, and Trump then calling for the termination of Tesla's government subsidies. The war of words reportedly erased over $150 billion from Tesla’s market capitalization in a single trading day.
The dramatic plunge in Tesla's market cap, reportedly its biggest one-day drop on record, underscored investor anxiety as a once-cordial relationship between the Tesla CEO and the US President publicly imploded. Let’s take a deep dive to understand the fallout and the impact on Tesla stock.
Trump-Elon fallout
The feud ignited over President Trump's proposed tax legislation, the "Big Beautiful Bill Act, a proposed U.S. budget bill aiming to extend Trump-era tax cuts, and cut clean energy subsidies. Elon Musk, who had previously served in a role within the Trump administration, is miffed because it threatens Tesla’s $7,500 EV tax credit and other green incentives, potentially costing Tesla over $1 billion.
Musk has become a vocal critic of the bill, labeling it a "disgusting abomination". While his criticism had been simmering, the situation escalated rapidly on June 5th. The tension boiled over when Trump, during a White House meeting, expressed his disappointment with Musk's stance. This set off a rapid-fire exchange on social media platforms.
Here's a timeline of how the events unfolded in the Trump-Musk fallout causing Tesla m-cap plunge:
| Time (IST) | Event | Impact on Tesla Stock Price |
| 07:00 PM (Jun 5) | Market opens with Tesla at ~$325. Early sharp decline likely tied to Musk-Trump political tensions. | Drops to ~$315 |
| 09:38 PM (Jun 5) | Trump appears in a video saying, “Elon Musk has Trump derangement syndrome,” | Falls again after brief stability |
| 10:16 PM (Jun 5) | Elon Musk tweets: "Without me, Trump would have lost the election, Dems would control the House and the Republicans would be 51-49 in the Senate." | Falls further to ~$305. |
| 11:27 PM (Jun 5) | Elon Musk posts a poll on X (formerly Twitter): "Is it time to create a new political party in America that actually represents the 80% in the middle?" | Falls to ~$302–$303 |
| 12:07 AM (Jun 6) | Trump posts on Truth Social: "The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon's governmental Subsidies and Contracts. I was always surprised that Biden didn't do it!" | Dips below $300 to ~$295. |
| 01:00 AM (Jun 6) | Market closes with no further developments. | Closes in deep red at $285 |
(All times approximate and converted to IST)
Source: Bloomberg
Donald Trump's threat to terminate government contracts and subsidies for Tesla and SpaceX, Musk's aerospace company, proved to be a critical blow to investor confidence. The rout shed $153 billion from Tesla’s market value, the biggest one-day drop, according to an NDTV World report.
Want to know whether Tesla is overvalued? Read this BLOG
Why does this matter to Elon Musk?
From tax credits to regulatory incentives, Tesla has long benefited from federal and state-level programs designed to promote clean energy and electric vehicles. Over the years, the EV maker has received billions in direct and indirect support:
| Type of Support | Details |
| Direct Support | $2.8B in subsidies; part of ~$15.7B across Musk’s companies in contracts, loans, and credits |
| Regulatory Credits | ~$11.4B earned by selling EV emission credits to automakers |
| Federal & State Incentives | $7,500 EV tax credit; state grants and tax breaks |
| Early Federal Loan | $465M loan from the U.S. Dept. of Energy in 2010 |
Source: CBS News, SubsidyTracker, Company Filings
Elon Musk has maintained for years Tesla didn’t need subsidies, once claiming: “Take away the subsidies. It will only help Tesla.” However, as policy realities shift, so has his position. In 2025, as the Big Beautiful Bill threatens to abruptly cut off key incentives, Musk now calls the bill a “disgusting abomination” and advocates for a gradual wind-down of subsidies.
Musk-led Tesla has pushed for a "sensible wind down" of some renewable energy tax credits, arguing an abrupt end would "would threaten America's energy independence." While Musk may have said that Tesla doesn’t need incentives, many buyers say they drove their EV choice. According to J.D. Power’s E-Vision Intelligence Report, 72% of Tesla customers cited incentives as a key reason for their purchase in 2024.
Tesla staring at a $3.2 billion loss?
The One Big Beautiful Bill threatens to dismantle these advantages by removing key subsidies, particularly the $7,500 EV tax credit and regulatory credit programs. According to JP Morgan, this could result in a $3.2 billion annual loss for Tesla. This would represent:
- ~45% of Tesla’s 2024 net income ($7.1B GAAP)
- 58–71% of FY25 projected net income (estimated at $4.5–5.5B)
Source: JP Morgan, Yahoo Finance, FactSet, Company Reports
The sales impact could be equally severe. Analysts expect that eliminating the EV tax credit could cut Tesla’s annual sales by 12–15%, potentially wiping out over $11 billion in automotive revenue, based on 2024 figures.
Source: CBS News, PBS, Devdiscourse
The spat between Elon Musk and Donald Trump is a stark reminder that when corporate leadership becomes deeply entangled in political conflicts, investors can bear the brunt.
Elon Musk-Trump: The High-Profile Controversial Alliance
The Musk–Trump relationship has been a rollercoaster. Musk once sat on Trump’s advisory councils, and after the 2024 election, some investors viewed this proximity as a potential win for Tesla. But public sentiment shifted as Musk’s political commentary and associations began drawing criticism, casting a shadow over Tesla’s brand. His exit from government advisory roles just a week before the June feud was initially seen as a welcome refocus on Tesla.
Adding to investor discomfort is the broader context of political risk. Trump remains a polarizing figure, and ongoing media scrutiny, including reported links to Jeffrey Epstein and the release of the Epstein files, has only intensified that perception. While not directly tied to Tesla, such associations can amplify reputational concerns when a CEO closely aligns with controversial public figures, irrespective of the direct triggers for specific market events like the June 5th feud.
What's Next for Tesla?
The immediate future for Tesla shareholders is likely to remain choppy. The company faces the challenge of navigating the fallout from this high-profile dispute while simultaneously pushing forward with ambitious projects like the robotaxi launch. However, the events of June 5th serve as a broader cautionary tale. For Tesla, the road ahead involves not just navigating technological and market challenges, but also the complex nature of business and politics.
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