Tesla Stock Tanks Over 7% After Elon Musk Announces Plan to Form a New Political Party

Tesla (NASDAQ:TSLA) stock fell over 7.3% during early trading on Monday to £215 ($292.3) per share after CEO Elon Musk announced Saturday on X, formerly Twitter, that he was forming the 'America Party' based on a poll, which received 79 million votes. Over 65% of the voters said 'Yes' to a new party.

Musk has expressed opposition to US President Donald Trump's 'One Big Beautiful Bill,' which was signed into law last week. The Committee for a Responsible Federal Budget estimated that the bill includes tax cuts and will increase national debt by nearly £2.93 trillion ($4 trillion) over the next decade.

Musk's rift with the Trump Administration deepened after he stepped down as chief of the US Department of Government Efficiency.

'I am saddened to watch Elon Musk go completely "off the rails," essentially becoming a TRAIN WRECK over the past five weeks,' Trump wrote on Truth Social. 'He even wants to start a Third Political Party, despite the fact that they have never succeeded in the United States – The System seems not designed for them. The one thing Third Parties are good for is the creation of Complete and Total DISRUPTION & CHAOS.'

Trump added that Musk's reaction could also be attributed to the elimination of the electric vehicle mandate, which would have compelled people to buy an EV in a short period of time. 'People are now allowed to buy whatever they want - Gasoline Powered, Hybrids (which are doing very well), or New Technologies as they come about - No more EV Mandate,' Trump noted.

Tesla's Growing Challenges in China

Tesla reported last week that its EV deliveries dropped 13.5% year-over-year in Q2. Model Y crossover and Model 3 sedan deliveries were down 11.5% YoY, while Cybertruck deliveries nosedived 51.8%.

Warren Buffett-backed BYD's rapid growth in China with feature-rich EVs poses problems for Tesla as Musk explores ways to tackle shrinking market share. In May, Tesla sold under 40,000 EVs in China, a 30% YoY decline.

The Wall Street Journal said in a recent report that car buyers believe Tesla EVs no longer appear as leading-edge as before, and government restrictions on Tesla have impacted their popularity.

Furthermore, Tesla's inability to fully launch its FSD driver-assistance service in China is also contributing to its problems on the mainland. Musk sought to roll out FSD in China, but faced hurdles from Chinese regulations, which prevented the EV maker from sending local driving data overseas due to security concerns. Moreover, the Chinese government might no longer view Musk's relationship with Beijing as an asset after his fallout with Trump.

'While the core Musk supporters will back Musk at every turn no matter what, there is [a] broader sense of exhaustion from many Tesla investors that Musk keeps heading down the political track,' Wedbush analysts Dan Ives recently wrote. 'After leaving...DOGE, there was initial relief from Tesla shareholders and big supporters of the name that Tesla just got back its biggest asset, Musk. That relief lasted a very short time and now has a taken a turn for the worst with this latest announcement.'

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