President Trump and Elon Musk’s big, beautiful brawl seems to be cooling off just a bit, much to the relief of Tesla investors.
After hurling insults at each other on social media on Thursday afternoon, Musk indicated that evening he’ll simmer down for the sake of the country and, more importantly for his financial situation, Tesla’s stock. On Thursday, as Trump threatened to pull government contracts for Musk’s companies, Tesla shares plummeted 14%, dragging down its market value by $152 billion—the biggest one-day drop in its history. While Friday ushered in a recovery of 3.67%, investors are no doubt holding their breath, wondering what’s next.
No one can predict what Trump or Musk will do or say next, but what’s clear to all is that Tesla’s future is riding on it.
The biggest threat? Trump’s tax bill aims to broadly eliminate a $7,500 EV credit by the end of 2025, which could dent Tesla’s annual profits by an estimated $1.2 billion, according to JP Morgan analysts. Another bill aims to block California’s ban on gas-powered cars by 2035, draining Tesla of another $2 billion in net income, per JP Morgan.
Even Tesla’s upcoming self-driving taxis are getting gummed up in red tape, having just received a fresh probe from the National Highway Traffic Safety Administration over how its robotaxis will perform in inclement weather. Musk has bet the farm on autonomy, and that self-driving promise accounts for 77% of its sky-high valuation, per RBC Capital analyst Tom Narayan.
All told, pending legislation could destroy over half of Tesla’s profits, according to a report from JPMorgan analyst Ryan Brinkman.
Pay attention to the One Big Beautiful Bill
Musk kicked up quite a fuss over Trump’s “disgusting abomination” of a tax bill, with Tesla spending $240,000 lobbying Washington in favor of preserving the EV tax credit and other favorable EV policies. But so far, they remain squarely on the chopping block.
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Trump also pointed out that the “the easiest way” to curb government spending would be to "terminate Elon’s governmental subsidies and contracts,” which have totaled at least $38 billion (mostly through SpaceX). Although it’s not clear how serious Trump's threat is, it's clear he can deal a severe financial blow to Musk's business empire.
“This saga is a legislative cliff-hanger, not the series finale,” says Michael Ashley Schulman, CFA, at Running Point Capital, who urges investors to keep their eye on the Senate rather than their social feeds. “OBBB [One Big Beautiful Bill] squeaked through the House 215–214; a single moderate senator or Musk-funded primary challenge could neuter the nastier EV provisions,” he points out.
Plus, “The unexpected carrot is that the same bill adds a juicy above-the-line deduction of up to $10K a year on interest for loans on vehicles built in the USA. Tesla, whose entire US line-up is red-white-and-blue–assembled, could capture this perk far more than BMW or BYD.”
In the meantime, Trump has indicated that he’s moving on from the Musk spat and has no plans to speak to him. Still, since actions speak louder than words and the president is never one to miss a last-minute jab, he added that he might ditch his Tesla.—JD