Key Takeaways
- Financial Risk: Tesla (TSLA) may lose $1.2B in earnings, $11B in credit sales, and $22B in SpaceX contracts if subsidies are cut.
- Stock Drop: Trump–Musk feud led to a 5.3% fall in Tesla shares; Musk spent hundreds of millions backing Trump in 2024.
- Uncertain Future: Tesla’s robotaxi plan faces regulatory delays; tax bill could add $3T to U.S. debt.
Tesla Shares Slide as Trump Threatens Subsidy Cuts
Tesla shares fell 5.3% on Tuesday following a late-night social media post by President Donald Trump, who threatened to slash federal subsidies to Elon Musk’s companies. Trump accused Musk of receiving “more subsidies than any human being in history” and suggested programs supporting SpaceX, Starlink, and Tesla’s electric vehicle (EV) operations should be eliminated.
On his Truth Social post, Trump implied that ending these subsidies would result in “BIG MONEY TO BE SAVED!!!” and mocked Musk’s origins, saying he might need to “head back home to South Africa” if support was withdrawn. Musk responded on X with “I am literally saying CUT IT ALL. Now.” The comments reignited a feud that had temporarily cooled after an earlier June sell-off in Tesla shares.
Billions at Stake: EV Credits, Contracts, and Regulatory Risk
Tesla and Musk’s ventures stand to lose billions if Trump’s threats materialize. Tesla has historically benefited from $7,500 EV tax credits and has earned nearly $11 billion by selling regulatory credits to automakers that can’t meet emission standards. Without those sales, Tesla would have reported a loss in Q1 2024. Additionally, Musk’s rocket company, SpaceX, holds approximately $22 billion in federal contracts. Analysts at J.P. Morgan estimate that eliminating EV credits alone could impact Tesla’s 2024 earnings by as much as $1.2 billion, about 17% of its projected operating income.
Meanwhile, other EV makers also felt market pressure, with Rivian shares dropping 2% and Lucid falling 3.8%. Treasury Secretary Scott Bessent dismissed concerns over deficit increases from Trump’s tax bill, saying, “I’ll take care of” the nation’s finances, despite analysts projecting the bill would add around $3 trillion to the U.S. debt.
Political Fallout and Tesla’s Future Uncertainty
The fallout between Trump and Musk — once political allies — has grown into a full-blown public confrontation. Musk, who reportedly spent hundreds of millions supporting Trump’s 2024 campaign, has since turned critical, calling for a “new political party that actually cares about the people.” Trump, speaking to reporters, warned that Musk could “lose a lot more than that” over his opposition to the bill. Republicans now fear that the Musk-Trump rift may damage their chances in the 2026 midterm elections. Compounding Tesla’s challenges is regulatory uncertainty over its robotaxi program in Austin, Texas — a key part of the company’s future valuation, which hinges on federal and state approval.
Gene Munster of Deepwater Asset Management warned, “The substance of Tesla’s valuation right now is based on progress towards autonomy.” As tensions continue, the Electrification Coalition urged lawmakers to revise the bill, while investors like Gary Black expressed concern over Musk’s political moves, saying: “Not sure why @elonmusk didn’t see this coming.”
Market Update Into September 14th: Rate Hike Incoming?