Trump-Musk Fiasco Sends Tesla Crashing

A disagreement on politics leaves Tesla with a $152 billion loss in equity, but can the decline still continue, or does it mean that Tesla can finally break free from the influence of politics?

A War of Words

Last week, Tesla's CEO, Elon Musk, and US President Donald Trump had a public fallout that resulted in a , as both traded barbs on social media. Trump, who had previously supported buying Teslas, was reportedly looking to get rid of the one he owned. It was a spectacular change in stance for the billionaire leader of Tesla, who had previously incurred political backlash from supporting Trump. The inciting incident of the fallout also seems market-relevant, as a massive budget is making its way through Congress and facing opposition from Musk. He is worried that his efforts to cut spending on DOGE will be undermined by the increase in government expenditure that is likely to be approved.

as Musk reportedly took a break from social media. However, it became increasingly clear over the weekend that the relationship between Musk and Trump was irreparably damaged when it was reported that Musk had tried to have a phone call with Trump and was rebuffed. Tesla had already suffered reputational damage from Musk's public support for Trump, with dealerships targeted for terrorism, random cars being damaged on the streets, and , where the Trump Administration is engaged in efforts to pressure the EU on trade. While a very public rejection of the right-wing Trump might be seen as positive to the left side of the political spectrum, the reason for the fallout might not help smooth things over: Musk wants even more cutbacks in spending than Republicans are willing to do.

It's Not (Just) About the Cars

While the immediate concern around the relationship between Tesla and the White House is the impact on sales, analysts point to . A significant portion of the company's share value is based on future prospects, particularly in the realm of robotaxis. On the one hand, the share price recovered substantially earlier this year thanks to the announcement that autonomous cars would be tested starting in June, with the goal of operating in up to 25 cities next year. On the other hand, the company could face additional regulatory hurdles if the Administration takes a dim view of it, which could delay the rollout and harm investor confidence in the company.

Some analysts argue that as much as . However, they also caution that Tesla is falling behind the competition, such as Waymo, which already has self-driving taxis operating in several cities. The company's share price soared after Musk said he would focus more on managing his companies, but that was before the fiasco with the President of the United States. The end result of the current situation might mean that Musk is actually forced to focus on delivering for the company after alienating both the political left and right, allowing Tesla to recover over time. However, relying on Musk keeping a low profile might be a somewhat risky investment.

TSLA in DCB Pattern?

Technically, Tesla has bottomed out at $215 after forming a double bottom pattern in April. However, with prices stalling and reverting near the 50% Fibonacci of the $490-$215 leg at $370, this recovery could be a bull trap. Losing the regional floor would suggest a Dead-Cat-Bounce (DCB) pattern, opening the door to lower prices. Support below the $180 swing sits at the $140 level. To the upside, $320 and $350 appear as short-term resistance levels at the 38.2% and 50% Fibonacci, with a move past the peak invalidating the DCB pattern and eventually exposing $400, $440 and the market top.

SpreadEx / Tesla

Key Takeaways

The Trump-Musk fiasco has caused a $152 billion equity hole in Tesla, stemming from concerns over government spending and Trump’s efforts to pressure the EU on a trade deal. While TSLA recovered somewhat, Tesla’s future prospects in the realms of autonomous vehicles and robotics could have long-term implications, with analysts already pointing out that the company is falling behind the competition. Despite recovering temporarily, this could be part of a Dead-Cat-Bounce formation, and not a “buy-the-dip” scenario.