Tesla already had a major problem. Then Musk went to fight Trump

Tesla After a disastrous first quarter, we face major challenges as we try to get back on track. These headwinds have been heavily strengthened this week.

CEO Elon Musk officially signed a term with the Trump administration at the end of May, hitting the 130-day mark. On his way out the door, Musk expressed sharp criticism of Trump’s signature spending bill being debated in Congress as it is expected to affect national debt.

Disagreements in policy quickly escalated into a full online brawl, with Musk and President Donald Trump casting insults from their respective social media platforms. After Musk called “one, a big beautiful bill” “hate” and gathered his followers on X to “kill the bill,” Trump said Musk threatened to be “crazy” and blocked off the subsidies for Musk’s corporate. Musk replied, “Go ahead and make my day.”

Rift plunged 14% of Tesla shares on Thursday, sweeping out its value of around $152 billion. Musk remains the wealthiest person in the world, but his net worth plunged at $34 billion, according to Bloomberg’s Billionaire Index.

More importantly, Spatt has resulted in the collapse of relationships that fused business, politics and power in a virtually unprecedented way in US history. The impact on Tesla, which fell from the Trillion-dollar club on Thursday, could be serious, not just because Trump is considering selling or handing out the red models he bought in March after turning his White House lawn into a Tesla showroom.

A senior White House official told NBC News on Friday that the president was “not interested” in calling masks to resolve their feud.

The outrage from the Trump administration could affect everything, from future regulations, investigations and government support for Tesla to decisions about tariff exemptions the company is seeking to purchase Chinese-made manufacturing equipment.

Tesla’s stocks hadn’t performed badly over the wider market before the Musk and Trump split. Competitiveness with low-cost EV makers intensified, and consumer backlash against Trump’s political activity and rhetoric led to automobile revenues plummeting 20%, while revenue slipped 9% in the first quarter of the previous year.

This is not what Tesla shareholders expected when they rose about 30% in the days after Trump’s election victory in November. After spending nearly $300 million to bring Trump back to the White House, Musk has been positioned to play a key role in the administration and pushing forward with changing regulations in ways that would benefit his businesses.

Instead, his company is suffering and Musk’s actions are primarily responsible.

One of his most divisive actions, leading the Trump administration’s government efficiency (DOGE), was the dismantling of USAID, previously delivering billions of dollars in food and medicine to over 100 countries.

Beyond the US, Musk supported the German far-right militant Afd, giving him a gesture that was considered a Nazi salute at the inauguration rally.

This has resulted in many cases of vandalism and arson at Tesla facilities and vehicles in the last few months, as well as a wave of peaceful protests at Tesla stores and service centers in North America and Europe.

The Musk protest ads appeared at Times Square in New York and London’s Bus Shelters, urging people to boycott Tesla, with some labeling the company’s EVs as “Swastistars.” The Vancouver International Auto Show has removed Tesla from its list of exhibitors, fearing that the company’s presence could cause safety issues.

Additionally, President Trump’s drastic tariffs led to concerns that the costs of parts and materials essential to EV production would increase. In its first quarter revenue report in April, Tesla said it would “revisit the 2025 guidance with the Q2 update,” following the growth of its promise this year.

The pension fund investing in Tesla says the company’s “crisis” requires leaders to work at least 40 hours a week to focus on solving the problem.

Public servants reflect that sentiment and are calling on Tesla’s board to take action.

New York City Director Brad Lander said in a statement Thursday to CNBC that the “schoolyard battle” between Trump and Musk “emphasizes whether Tesla’s weak accountability measures and poor governance threaten not only the company’s financial stability and shareholder value, but also the future of at-home versions of EV production.

Maryland Secretary Brook Lehman told CNBC that its board of directors “is not working to ensure that Tesla has a CEO, which places the company’s interests first.”

She added that Musk’s name is synonymous with Tesla, so the board needs to ensure that Tesla can stand on its own, regardless of who is leading the company.

“Musk’s actions continue to threaten Tesla’s future,” Lehman said. “As long as Tesla is identified as Elon Musk and he continues to be a polarizing figure, he will continue to undermine the brand, a big part of Tesla’s value.”

Mask did not respond to requests for comment. CNBC also contacted board chairman Robin Denholm and comments from directors and executives who work in government relations and CEO offices. None of them responded at the time of publication.

Tesla investors focus on the fundamentals of their business and are justified by skepticism.

The company has not been able to deploy new, innovative, affordable model EVs, but Chinese competitors like BYD are flooded with markets, especially in Europe.

Goldman Sachs analysts lowered Tesla’s price target on Thursday. Deliveries for this quarter track US tracking, primarily due to the 2025 outlook. China’s sales from these two months fell approximately 20% from the previous year.

Quality is also a problem. Tesla announced eight voluntary recalls of CyberTruck in 15 months due to a variety of issues, including software bugs and stick accelerator pedals.

Musk is urging investors to largely ignore their core business and look to the future. He says it’s about self-driving cars and humanoid robots.

But even there, Tesla is behind him. In AVS, the company gave up the ground alphabet Waymo operates commercial Robotaki services in several US markets. After missing the 10-year deadline, Musk has promised to launch a small amount of Tesla Driverless Ride Hale Service in Austin this month.

The Austin Robotaxy Service will operate in the Geofykens area, Musk said in a recent interview with CNBC’s David Faber, starting with a small fleet of just 10-20 Model Y vehicles with full self-drive (FSD) non-surveillance technology. If everything goes well, Musk said Tesla will quickly expand its unmanned product to other markets such as San Francisco and Los Angeles.

What consumers can’t see right away are the Cybercab and Robvan vehicles that Tesla promoted at the “We, Robot” event at last year’s “We, Robot” event to boost customer and investor enthusiasm.

On Friday, Milano Cobac, Tesla’s vice president of Optimus Robotics, announced that he would be resigning after joining the company in 2016. Musk thanked X’s post for his “outstanding contribution.”

Still, there are plenty of Tesla bulls and musk fans who believe in the CEO’s vision. The 4% rebound of the stock on Friday is a sign that some have seen the opportunity to buy dip.

“I think the real story here is the foundation of Tesla investors,” Josh Brown, CEO of Ritholtz Wealth Management and CNBC Pro, said on Friday CNBC’s “Halftime Report.” “This is still empty stock.”

Fundstrat’s Tom Lee said the Tesla sale was “overdone.”

Tesla’s market capitalization, which has been dramatically expanding compared to all other US automakers, is built on Mask’s vision of Tesla’s Optimus Humanoid robots working in the factory and babysitting children.

Morgan Stanley’s Adam Jonas wrote this week that “Tesla still holds a huge number of valuable cards that are primarily apolitical,” pointing to what he sees as the company’s “AI leadership, autonomous/robotics, manufacturing, supply chain reorganization, renewable power, and (and) critical infrastructure.”

As for Tesla’s existing business, the most pressing impact from what’s going on in Washington, D.C. is the rollback of EV credits for the current budget bill, which Musk is loudly opposed, and has struggled to find enough support in the Senate. There are also tariff issues and whether Tesla can get the treatment he likes, but this seems increasingly unlikely to be Musk and Trump’s fallout.

Matthew Labro, a former Tesla Staff Program Manager, told CNBC he was not surprised that Musk had blown up relations with the president. Lovelot ended earlier this year after sending an open letter protesting Musk’s divisive political action.

“I’m devastated by the country and the climate, but Elon just blames himself,” Lovelot said in an interview. “Bring the loose Canon back and expect a stray Canon fire.”

Tesla investors are currently unable to know how much of Musk’s energy and time will return to his only public company and the business that will take up the majority of his wealth. Even without politics, he is still among other businesses, including SpaceX, AI startup Xai, and Brain Tech startup Neuralink.

As of Thursday, the masks still had Westwing offices that had not yet been cleaned, the two executives told NBC News. One authorities said the space is likely to be packed in the coming days.

And while his time at Trump Camp may have ended, Musk called on his followers to form a new party in the US

“Is it time to actually create a new political party in America that represents 80% of the central one?” he wrote on X on Thursday. I wrote this in a post pinned at the top of his page. According to the post, 80% of the 5.6 million respondents to the unofficial poll said yes.

Musk’s actions this week may have caused a lasting rift with the president. But one thing is clear. His company cannot escape the White House.

Watch: The impact of Musk’s feud with Trump