Elon Musk’s auto company may suffer as a result of Donald Trump‘s backing.
As five Teslas queued up in the White House driveway on Tuesday, investors rejoiced as Trump defended Musk’s troubled and boycotted automaker by praising the CEO of the company at a press conference. Tesla stock may have closed higher for the day after plunging the day before after Trump referred to Musk as a “patriot” and declared that he had even purchased one of his vehicles.
However, analysts caution that the rare presidential support for a private enterprise may backfire.
Wedbush Securities financial analyst Dan Ives said, “Tesla is becoming a political symbol of Trump and DOGE, and that is a bad thing for the brand.” Ives was referring to the advisory group that Musk leads that is responsible for reducing government expenditure. “It hurts even though you think it’s helping.”
Following Trump’s overnight tweet on his Truth Social platform stating that Musk was “putting it on the line” to aid the nation, Tesla’s shares started to rise from its opening Tuesday. “Radical Left Lunatics” were trying to “illegally and collusively boycott Tesla, one of the world’s great automakers, and Elon’s ‘baby,'” according to Trump’s post.
Trump responded, “I don’t like what’s happening to you,” and then he selected a red Model S, which costs $80,000. “Wow,” he said as he slid into the driver’s seat. That is really lovely.
Following one of the greatest one-day sell-offs in Tesla’s history, the stock ended Tuesday’s trading session up about 4%.
This year, alternative electric vehicles, especially those from China, have severely outperformed Tesla. Musk’s tight ties to Trump and far-right causes around the world have also been noted by a number of car industry analysts. Protesters have surrounded Tesla dealerships in the United States, and the company’s cars have been destroyed on the street. Some Tesla owners have put bumper stickers with phrases like “I bought it before Elon went nuts” on their vehicles, possibly in an effort to avoid being singled out.
After falling 45% in 2025, shares fell more than 15% on Monday to $222.15, the lowest since late October, indicating a renewed sense of pessimism as global sales continue to slump.
Prior to the 2024 election, Musk contributed $270 million to Trump’s campaign, joined him on stage, and applauded his triumph over Democratic opponent Kamala Harris in November. By mid-December, Tesla’s stock had risen to $479 a share, but it is currently trading at about $230.
In the upcoming year, such decline could harm the business in two ways.
First, as an incentive, Tesla provides many of its employees with the opportunity to purchase shares at a reduced price. However, since the stock has dropped significantly, the discounted price from the previous year is frequently higher than the current price, thus there is no reduction at all and the incentive is meaningless.
Second, the decline in price might make it more difficult for Tesla to raise capital by offering investors freshly issued shares to finance development and expansion. While investing heavily in self-driving technologies and constructing plants in Texas and Berlin, the business sold $12 billion worth of shares in 2020. Although declining revenues suggest it may not need to expand anytime soon, a declining stock price means it will receive far less money from any future so-called secondary offers.
Musk has emerged as the spokesperson for the Department of Government Efficiency, or DOGE, the Trump administration’s slash-and-burn government downsizing initiative. The department intends to significantly cut government spending and has pledged to lay off large numbers of federal employees. For Tesla shareholders, Musk’s involvement has brought up a well-known concern: that the CEO, who also manages a number of other businesses, is too preoccupied to give his electric vehicle company his whole attention.
Recently, some of those other businesses have also had difficulties. Musk described Monday’s many crashes on his social networking platform X as a “massive” hack. However, Musk halved X’s workforce, and tech experts warned of greater vulnerability, similar to his clear-cutting of federal jobs.
About two months after another of Musk’s SpaceX rockets crashed, a rocket launched by the company burst and broke apart over Florida last week.