Tesla Inc. is under fire from all sides, feeding a very high-stakes public spat between President Donald Trump and CEO Elon Musk. This ongoing conflict has resulted in extreme volatility of the company’s stock price. A recent report from JPMorgan indicates that if California eliminates its emissions credit system, Tesla could potentially lose around $2 billion. The electric vehicle manufacturer is under financial duress at a very important time. This pressure likely increases as they get ready to deploy their robotaxi test program in Austin, Texas, later this month.
On Thursday, President Trump ramped up the rhetoric between him and Tesla’s new CEO Musk, which sent Tesla’s share price tumbling almost 10% as of midday Friday. This decline erased more than 20 billion dollars in market value. So did alarm over the often cozy regulatory environment that Tesla would likely face by virtue of Trump’s influence. Analysts warn that Trump could threaten Tesla’s ambitions by pressuring federal regulators to deny necessary approvals for its autonomous driving program.
The aftermath of the three-month spat poses fresh dangers for Tesla. That’s particularly troubling for the government subsidies and regulatory approvals critical to the company’s long-term success. Dan Ives, an analyst at Wedbush, commented on the situation, stating that it “puts massive pressure on Tesla shares with fears that Trump will turn from friend to foe and create a tough regulatory environment for Musk in the Beltway.”
Throughout its history Tesla’s stock price has behaved like an extremely volatile penny stock, and this recent plummet extends a disastrous pattern. The company’s shares are down close to a third from their all time high back in December. Investors are wary of the damage that could come from an antagonistic relationship between the two men. They worry it could do serious damage to Tesla’s operations and competitive position.
In response to the unfolding events, Tesla did experience a brief rally, climbing nearly 6% in early trading on Friday as tensions appeared to ease. Potential still hangs in the balance as uncertainty remains over the company’s future amid the dangerous and toxic ongoing feud.
Analysts point to the toxic fallout that would result should California lose its emissions credits. Gordon Johnson, an industry analyst, expressed his concerns, stating, “I can’t stress enough the risk of these credits going away.” If these credits are eliminated, competing automakers will be less likely to purchase them. This would be an even bigger blow to Tesla’s competitive advantage.
In addition to the potential loss of emissions credits, analysts are cautious about the future of Tesla’s full self-driving software. Should Trump or his administration decide to pursue their investigations again, this can null this whole program. This would be a huge nail in the coffin for Tesla’s stock price. Johnson highlighted the gravity of this risk, remarking, “If full self-driving were to be invalidated, that would be a huge hit to Tesla stock and to Musk.”
Even with all these unknowns, Ives is a little hopeful that someday soon we could see an unlikely reconciliation between Trump and Musk. He noted that “we believe cooler heads will prevail today and into the weekend. Hopefully.”
Seth Goldstein, another direct analyst, provided a more cautious assessment of the landscape. He stated, “While political fallout and potential retribution will move the stock, I don’t think this is as big an event as Tesla’s other events coming up this year.” This view underscores that the feud poses a cascading list of pressing issues for investors. It won’t necessarily overshadow some other big news on the immediate horizon for Tesla.
Though Tesla’s model is rigged with a massive growth opportunity, as the company prepares to roll out the initial phases of its robotaxi program. Musk views this endeavor as critical to Tesla’s long-term success. The trick, he believes, lies in making autonomous driving technology advances as a means to significantly increase productivity and consequently, revenue.
