Shares of Tesla (TSLA) faced significant pressure on Tuesday after President Donald Trump, in a late-night social media post, called for a federal review into cutting subsidies for Elon Musk’s companies.
The President’s remarks immediately impacted the market, causing Tesla’s stock to decline sharply in premarket trading.
The subsidy scrutiny
President Trump’s Truth Social post directly targeted government support for Elon Musk’s ventures.
Trump claimed Musk receives unprecedented subsidies, suggesting that without such backing, Musk’s enterprises—including rocket launches, satellite operations, and electric car production—would likely cease, potentially saving the country a “FORTUNE.”
He urged “DOGE,” the Department of Government Efficiency, which Musk briefly led, to “take a good, hard look at this.”
Tesla shares fell over 6% on the market opening on Tuesday after Trump’s comments.
The comments underscored the significant reliance of other Musk-led companies, like SpaceX and Starlink, on government policy and financial support.
SpaceX and Tesla have around $22.5 billion worth of federal contracts since the fiscal year 2000.
Most of them are long-term contracts with the US Department of Defense and NASA.
This includes a $5.9 billion Pentagon deal it won a couple of months back.
Political friction and Tesla share price swings
Trump reiterated his stance on subsidy cuts when speaking to reporters, linking his concerns to Musk’s public criticisms.
“He’s upset that he’s losing his EV mandate… but he can lose a lot more than that,” Trump stated.
This highlights an escalating public feud. Musk, who campaigned with Trump in 2024, has openly criticized a new tax and spending bill in Congress.
This bill is expected to reduce government support for green energy and electric vehicles while increasing the projected federal deficit.
This fiscal disagreement appears to be a key driver of renewed tensions.
A similar dispute in early June, also triggered by Musk’s spending critiques, previously led to a Tesla stock sell-off, though the stock had rebounded over 11% since June 5 before this latest incident.
As a result of the selloff in June, Tesla shares lost over $150 billion in its market valuation in a single day.
Musk’s broader political stance
Elon Musk quickly responded to President Trump’s social media post. On X, in reply to a screenshot of Trump’s message, Musk declared, “I am literally saying CUT IT ALL. Now.”
Beyond his critique of the tax bill, Musk has also targeted the Republican Party.
On Monday, he posted on X that it was “time for a new political party that actually cares about the people.”
This indicates a deeper dissatisfaction with the current political landscape and suggests a potential call for a new political movement.
The ongoing public discourse between these two influential figures, combined with Musk’s increasingly pointed political commentary, introduces an unpredictable layer of risk for investors in Tesla and his other ventures.
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