The Musk-Trump Blowup Is Tesla’s Latest Nightmare

Things were already bad at Tesla. But the spectacular collapse of CEO Elon Musk’s relationship with President Donald Trump into a smog of threats and insults Thursday promises to do far more damage to the company than declining sales, a lack of new car models and a badly tarnished brand, setting it up for federal retaliation from a grievance giddy administration.

With the full power of the federal government at his disposal, Trump can turn up the heat on multiple investigations into Tesla. The National Highway Traffic Safety Administration has a long-running probe of Tesla’s Autopilot and Full Self-Driving features, which are linked to multiple fatal accidents. He could push the Securities and Exchange Commission to review the veracity of some of Musk’s public Tesla comments, and even scrutinize the company’s heavy reliance on manufacturing in China.

NHTSA is also seeking information from Tesla about its robotaxi plans ahead of Musk’s intention to kick off a pilot program in Austin this month. There are no federal rules for autonomous vehicles and robotaxis, which are instead regulated at the state level. But depending on NHTSA’s review Trump could pressure Texas Governor Greg Abbott to block Tesla’s robotaxi launch.

“His surface area for attack is remarkable,” said a veteran automotive executive who asked for anonymity in order to speak freely. “The easiest lever to pull would be to resume investigations. Things Elon thought had been swept under the rug could come back to life.”

Building tensions between the two billionaires exploded into public on Thursday as Musk vehemently criticized Trump’s signature “One Big Beautiful” budget bill, which will add trillions to the national deficit Musk has tried to slash through DOGE. The spat, which took place across X and Truth Social, devolved into Musk claiming Trump wouldn’t have been elected without his help and even indicating he supports his impeachment. Trump responded with threats to “terminate Elon’s Government Subsidies and Contracts,” threatening SpaceX’s billions in federal contracts for rockets and satellites. Trump allies like Steve Bannon, a loud Musk critic, told the New York Times the president should launch investigations into South African-born Musk and deport him.

Even if things don’t go that far, Musk’s unrestrained public comments toward Trump may prove the most damaging for Tesla in the company’s history. While Musk mocked former President Joe Biden as a “damp sock puppet” on Twitter (now X) in 2022, he faced no consequences — Biden just ignored him. That’s not Trump’s style, a man who openly holds grudges against those he believes have wronged or insulted him. As president, he holds the keys to federal agencies and policies that would be detrimental to Tesla, and has repeatedly demonstrated he will use his power as a cudgel.

The most immediate blowback was a precipitous plunge in Tesla’s share price. The stock fell 14% on Thursday, shaving $152 billion off its market cap–more than the combined valuations of General Motors, Ford and Stellantis. Tesla is down 30% this year.

“Part of the investor backlash today might be that people were betting the Musk/Trump partnership would result in policies that would directly benefit Tesla,” said Loren McDonald, chief analyst with Paren, an electric vehicle industry data company. “Trump no longer has Musk’s back and with the breakup, Trump no longer has to say nice things about Tesla and EVs. He and the admin can go back into ‘EVs are evil’ attack mode.”

Investor Ross Gerber, a long-time Musk fan who’s become a critic of the billionaire CEO, echoed that concern.

“Elon going postal on Trump and Tesla stock is getting walloped. Trump will be returning his new Tesla and is saying he got Musked. All this can’t be good for shareholders. But hey, who cares about us?” Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, posted on Threads. “Can someone please take the phone away from him! wtf! 🤬 Tesla is getting destroyed.”

The top U.S. EV maker is already facing a tough quarter, dealing with collapsing sales in Europe and China compounded by higher costs and headaches created by Trump’s tariffs on steel, aluminum, auto parts and Chinese battery cells. The Republican-backed budget Musk despises and that Trump hopes to sign into law by next month also eliminates federal tax credits for electric vehicle purchases, as well as a range of incentives supporting battery and clean energy projects, which will also hurt Tesla. Trump claimed Thursday on Truth Social that Musk’s opposition to the bill was related to cutting these credits, though Musk has repeatedly said publicly he supports the elimination of the tax credit. Still, the likelihood of restoring the EV credits in the final version has likely gotten worse.

“With Musk taking on Trump and most of the GOP, the House and Senate probably won’t save the tax credit in any form as a bone for Musk/Tesla,” said McDonald.

The Tesla CEO’s inability to restrain his public comments have led to numerous problems over the years, including SEC fines and the loss of his chairman role after falsely tweeting in 2018 that he’d secured funds to take Tesla private. Soon after he also had to go to court to defend himself against charges of defamation after calling a critic “pedo guy.” That type of behavior has troubled investors, including public pension funds, which are particularly frustrated by the failure of Tesla’s board to rein in Musk.

“No other publicly traded company CEO would’ve been allowed to neglect his day-to-day duties like Musk has. No exception,” Illinois Treasurer Michael Frerichs, told Forbes this week. “And if they had undertaken personal activities that hurt the reputation of a company or brand that badly, would they be treated like he has been?”

Now an angry Trump could make things much worse, from investigations to gumming up Musk’s heavily touted Tesla robotaxi plans.

“With Trump and Musk acting like kids and broken lovers, Trump may do everything he can to slow the Tesla robotaxi rollout,” said McDonald. “I wouldn’t be shocked if Trump started to talk about how great Waymo is and that Tesla is really, really far behind them.”