Shares of Tesla Inc. declined more than 7% today after U.S. President Donald Trump criticized Elon Musk’s plan to launch a new political party.

The selloff appears to reflect investor concerns that the feud could negatively affect the automaker’s prospects.

In a research note, stock trading company Saxo Markets reportedly highlighted two potential sources of risk for Tesla shareholders. One is that Musk’s political activities could distract him from the automaker, where he serves as chief executive. The other is that the feud with Trump could lead to further cuts to the incentives that the U.S. government provides for electric vehicle buyers.

The Big Beautiful Bill Act, the budget reconciliation law that Congress passed last week, scrapped tax breaks on electric vehicle purchases. Consumers were previously eligible for credits worth up to $7,500.

The act is at the center of the Trump-Musk split. The feud began June 3 when Musk, who had backed Trump during the 2024 presidential election, criticized the legislation in a post on X. He expressed his opposition to the law several more times over the next few weeks.

On June 5, following another series of X posts criticizing the bill, Must launched a poll asking whether it’s “time to create a new political party in America.” On June 30, he stated that he would launch such a party if Congress were to pass the bill. This past Saturday, Musk announced that the “today, the America Party is formed to give you back your freedom.”

The move drew a negative reaction from Trump. “I’m saddened to watch Elon Musk go completely ‘off the rails,’ essentially becoming a TRAIN WRECK over the past five weeks,” Trump wrote in a late Sunday post on his Truth Truth platform.

It’s unclear exactly what impact the feud may have on Tesla. One possibility is that it could lead to increased regulatory scrutiny of the company’s autonomous vehicles, which are already the focus of two probes by the U.S. National Highway Traffic Safety Administration. Those investigations were launched over a series of collisions that involved Tesla’s autonomous driving software.

Last month, the automaker started piloting an autonomous taxi service in Austin. Over the next few months, it plans to expand its initial fleet of about 10 SUVs to more than 1,000 vehicles. Further down the road, Tesla intends to launch a fully autonomous vehicle called the Cybercab that doesn’t include a steering wheel or pedals.

The company’s taxis currently have safety drivers aboard. To operate the vehicles without human supervision, Tesla will require approval from NHTSA, the federal agency that is currently investigating its autonomous driving software. Investors may be concerned that the Trump-Musk feud may create a more challenging regulatory for the company, which has made autonomous vehicles a core focus of its long-term growth plans. 

Photo: White House