Elon Musk, CEO of Tesla and self-proclaimed “first buddy” of President Donald Trump, has stepped up criticism of the president’s massive tax legislation in recent days. Investors are starting to notice.
Tesla shares dropped more than 5 percent on Thursday on a day otherwise devoid of news for the electric vehicle maker, leading traders to speculate that Musk’s increasingly pointed rhetoric suggests strain in the relationship that has benefitted his sprawling empire of businesses.
Trump said on Thursday that Musk was upset because the bill took the EV mandate away.
“Look, Elon and I had a great relationship. I don’t know if we will any more,” the president said.
“He said the most beautiful things about me. And he hasn’t said bad about me personally. That’ll be next. But I’m very disappointed.”
Trump’s comments extended a decline in Tesla shares.
The world’s richest man, a key figure in the Department of Government Efficiency’s (DOGE) cost-cutting initiative for several months, has blasted the bill, not long after he said he would spend less time in the White House and more time with his companies.
On his social media platform X, Musk has called on Congress members to kill the legislation, calling it a “disgusting abomination“.
“It more than defeats all the cost savings achieved by the DOGE team at great personal cost and risk,” Musk, the largest Republican donor in the 2024 election cycle, said on X on Tuesday.
Musk’s leadership of DOGE and his alignment with the Trump administration have put off some Tesla buyers. Sales of his EVs have slumped in Europe, China and key US markets like California, even as overall electric vehicle purchases continue to grow.
Musk has slowly started to separate himself from the White House in recent weeks, stung in part by the wave of protests against Tesla.
“Elon’s politics continue to harm the stock. First, he aligned himself with Trump, which upset many potential Democratic buyers. Now, he has turned on the Trump administration,” said Tesla shareholder Dennis Dick, chief strategist at Stock Trader Network.
Musk’s other businesses, SpaceX and Starlink, dominate their respective markets, but have also come under scrutiny due to Musk’s relationship with Trump.
Those two businesses often serve as the default choice for commercial launches and satellite internet deployment, and foreign governments have also increasingly looked to Starlink, with regulatory approvals smoothed by Musk’s ties.
Tesla shares are down 12 percent since May 27, roughly coinciding with his decision to pull back from Washington activities.
The stock has been on a roller-coaster ever since his endorsement of Trump in mid-July 2024 in his re-election bid, gaining 169 percent from that point through mid-December. That was followed by a 54 percent selloff through early April as a “Tesla Takedown” protest movement intensified.
Tax bill
The House of Representatives version of the budget bill proposes largely ending the popular $7,500 electric vehicle subsidy by the end of 2025. Tesla and other carmakers have relied on incentives for years to drum up demand, but Trump promised during the transition to end the subsidy.
Tesla could face a $1.2bn hit to its full-year profit, along with an additional $2bn setback to regulatory credit sales due to separate Senate legislation targeting California’s EV sales mandates, according to JP Morgan analysts.
“The budget bill contains bad stuff for Tesla with the end of the EV credits, and just generally his falling out with Trump has risks for Tesla and Elon’s other companies,” said Jed Ellerbroek, portfolio manager at Argent Capital Management.
Musk’s public attacks have upset potential Republican Tesla buyers as well, Dennis Dick added. One White House official on Wednesday called the Tesla CEO’s moves “infuriating”.
The billionaire joined Senate Republican deficit hawks this week in arguing that the House bill does not go far enough in reducing spending.
Overall, Tesla shares are down 22 percent this year, including Thursday’s losses. But the company is still the most valuable carmaker worldwide by a long shot – carrying a market value of $1 trillion, far surpassing Toyota Motor’s market value of about $290bn.