Tesla Stock Drops After Musk Launches New Political Party

Tesla stock dropped 6.8% to $293.94 on Monday after Elon Musk announced the creation of a new political group, the “America Party”. The timing has disappointed investors who had hoped Musk would focus on Tesla after leaving his post in the Trump administration.

The broader market didn’t fall as hard. The S&P 500 was down 0.5%, and the Dow dropped 0.4%. Tesla stock's sharp decline shows that investors are alarmed with Musk’s political focus.

On Saturday, Musk ran a poll on X asking if a new political party should be formed.

Over 1.25 million people voted, and 65.4% said “yes”. The post has been viewed more than 90 million times.

Tesla projects could become major revenue drivers in the future, but right now, Tesla’s core business, electric vehicles, is struggling.

Tesla Stock Was Downgraded

Tesla stock was also hit by a downgrade from William Blair analyst Jed Dorsheimer, who cut the rating to Hold from Buy. He doesn’t see a clear price target.

One big concern is Trump's new “One Big Beautiful Bill” signed into law on Friday. It eliminates up to $7,500 in federal tax credits for EV purchases; this could seriously hurt Tesla's financial performance, especially given that the company also relies on sales of zero-emission credits.

Wall Street Wants Musk to Focus on Tesla, Not Politics

Wedbush analyst Dan Ives warned that Musk is picking the worst moment to go deeper into politics. Tesla needs leadership to get through its EV slowdown and launch its next generation products. Ives still rates the stock a Buy with a $500 price target, but he said investor patience is not limitless.

Tesla stock has some support near $290. That level could attract buyers, or give way to further drops if investor confidence continues to slide.

EV Sales Are Down

Tesla delivered about 721,000 vehicles in the first half of 2025, a 13% drop from last year. Wall Street had expected closer to 970,000. Many analysts now project just 1.7 million sales for the year, down from 1.8 million in 2024.

Part of the problem is political. Tesla has lost appeal among some left leaning buyers who once supported its green mission. The company admitted brand perception issues in its April earnings call.

Investors Have Limited Legal Options

Because Tesla reincorporated in Texas, shareholders must own at least 3% of the company, about $30 billion worth, to file a lawsuit. Only Musk and a few massive index funds meet that threshold.

So far, no lawsuits have been filed over Musk’s political activity, but pressure may grow if the stock keeps dropping.

Bottom Line Is

• Tesla shares fell 6.8% after Elon Musk announced the formation of the “America Party”.
• Investors were hoping Musk would shift focus back to Tesla after leaving his role in the Trump administration, but it didn’t happen.
• Tesla is already under pressure from falling EV sales, with 2025 deliveries down 13% from last year.
• Policy changes under President Trump - the removal of EV tax credits, added more weight to the stock’s decline.
• Shareholder influence is limited, due to Tesla’s reincorporation in Texas, which raises the threshold for filing lawsuits.
• Upcoming earnings on July 23 will be a crucial moment to assess whether Tesla can stabilize or if investor confidence continues to erode.