As Musk calls for Trump’s impeachment and alleges ties to Jeffrey Epstein, the President retaliates by threatening to cut federal contracts and subsidies for Tesla, SpaceX, and Starlink.
A public and increasingly acrimonious disagreement between Tesla CEO Elon Musk and President Donald Trump is raising significant concerns about the potential impact on Tesla’s business operations and market position. The feud, which escalated recently after Musk publicly criticized Trump’s budget bill and withdrew from his advisory role, has already seen Tesla’s stock price plummet by 14% and wiped out approximately $150 billion in market value.
Tesla has been grappling with brand issues for several years, exacerbated by Musk’s increasingly political stance and his direct involvement with the Trump administration. While his prior alignment with Trump was believed to attract some conservative buyers, it alienated a significant portion of Tesla’s traditional, left-leaning customer base, leading to “Tesla Takedown” protests globally.
Now, with Musk labeling Trump an “ingrate” and calling his signature legislation an “abomination,” there is a strong likelihood of further alienation, particularly among MAGA supporters. The negative impact on Tesla’s brand has been most evident in North America and Europe. Tesla’s sales in Europe are on track to be down roughly 50% this year, and its market share in Canada has been significantly eroded, with competitor GM even overtaking Tesla as the #1 EV seller in Q1 2025 in Canada. Tesla registrations in Quebec, Canada’s largest EV market, saw a drastic 90% decline in Q1 2025.
In the US, while brand impact is undeniable, delivery figures haven’t shown as sharp a decline due to record discounts and incentives offered by Tesla, the less competitive nature of the US EV market (with foreign and Chinese EVs facing significant barriers), and the looming expiration of the $7,500 federal EV tax credit, which creates urgency for buyers.
A major point of contention in the Trump-Musk feud is the “Big Beautiful Bill” making its way through Congress, which aims to eliminate key EV incentives. President Trump campaigned on removing the $7,500 federal EV tax credit, a stance Musk had previously supported, albeit with a caveat about also removing fossil fuel subsidies.
The current bill, if passed, would largely end the $7,500 new-vehicle tax credit by the end of 2025 for most vehicles, along with the 30% tax credit for solar, wind, and energy storage (ITC), and incentives for US battery production. It also seeks to undermine California’s Zero-Emission Vehicle (ZEV) credits. The potential loss of these incentives is a critical blow to Tesla’s profitability; analysis suggests that without ZEV credits, the EV tax credit, and battery manufacturing credits, Tesla would have been unprofitable in Q1 2025. This proposed legislation could severely impact the entire US EV market, making 2026 a challenging year for the industry.
Musk’s past support for Trump was widely perceived as an attempt to alleviate federal investigations into his companies. However, with the public fallout, there’s a heightened risk that ongoing investigations by agencies such as the SEC, DOJ, NHTSA, US Labor Board, and FTC could intensify. President Trump has publicly threatened to “terminate Elon’s Governmental Subsidies and Contracts,” further signaling potential retaliation. Specifically, the SEC could pursue Tesla over recent statements regarding demand, and NHTSA’s investigation into Tesla’s Full Self-Driving (FSD) program could be pressured, potentially impacting its planned pilot program in Austin or even leading to FSD feature recalls.
The situation remains fluid, but the public spat between Musk and Trump introduces significant new uncertainties and risks for Tesla’s business outlook, particularly in its crucial North American market.