Tesla Inc. (NASDAQ: TSLA) experienced a significant decline in its stock price on July 7, 2025, dropping 6.8% to close at $293.94. This downturn followed CEO Elon Musk’s announcement of the formation of a new political entity, the “America Party,” which has raised questions about his focus on Tesla’s core business operations.
The announcement came on July 5, when Musk declared the establishment of the America Party via his social media platform, X. This move was seen as a direct challenge to President Donald Trump and the traditional two-party system in the United States. Musk’s decision was reportedly influenced by his opposition to the recently signed “One Big Beautiful Bill,” a tax and spending package that he criticized for potentially increasing the national deficit by $3.9 trillion over the next decade .
Investor reaction was swift and negative. Analysts expressed concerns that Musk’s political endeavors could distract from Tesla’s strategic objectives. Dan Ives, a tech analyst at Wedbush, noted that Musk’s deeper involvement in politics is contrary to what Tesla shareholders desire, emphasizing the need for the CEO to concentrate on the company’s business .
The political rift between Musk and Trump has further complicated matters. Once allies, their relationship has deteriorated, with Trump criticizing Musk’s new political initiative and threatening to revoke federal subsidies for Musk’s companies. This feud has added to investor unease, as potential policy changes could impact Tesla’s financial standing .
Compounding these issues, the new tax legislation signed by President Trump eliminates the $7,500 federal electric vehicle tax credit after September 30, 2025. This change is expected to affect Tesla’s sales, as the incentive has been a significant factor in consumer purchasing decisions. Additionally, the law ends zero-emission vehicle credit sales and increases tariffs on imported Chinese EV components, potentially raising Tesla’s production costs .
Tesla’s stock performance reflects these challenges. The company’s shares have declined approximately 28% year-to-date, with the recent drop marking the most significant single-day loss since Musk’s public disagreements with Trump began in June . Investment firms have responded cautiously; for instance, Azoria Partners postponed the listing of a Tesla-focused exchange-traded fund, citing the need for clarity on Musk’s political intentions .
The broader implications of Musk’s political involvement are still unfolding. While he has stated that the America Party aims to represent the “80% in the middle” and focus on deficit reduction, the practicality of establishing a new political party faces significant hurdles, including state ballot access laws and federal campaign finance regulations .
As Tesla navigates these developments, investors and stakeholders will be closely monitoring how Musk balances his political aspirations with his responsibilities at the helm of the company. The upcoming quarterly earnings report, scheduled for July 23, will be a critical indicator of Tesla’s financial health amid these challenges.
