Tesla's Nightmare Week: $380 Billion Lost, EV Mandate Scrapped, Trump Fallout Deepens

The once-strategic alliance between US President Donald Trump and tech billionaire Elon Musk has unraveled spectacularly, triggering political and market shocks that have erased over $380 billion from Tesla's market value. The fallout, driven by Musk's public criticism of Trump's tax bill and Trump's threat to cancel Tesla and SpaceX contracts, has sent Tesla shares into a freefall and shaken investor confidence in the world's most valuable automaker.

Tesla takes the heat: From eighth to tenth globally

Tesla, which kicked off 2025 as the eighth most valuable company worldwide, has now dropped to the tenth position, as its market cap shrinks by nearly 30% to $917 billion. Amid declining electric vehicle demand and heightened political risks, Tesla is now the worst-performing large-cap stock this year, according to a Reuters report.

Musk-Trump rift turns personal

The feud began after Musk blasted Trump's tax-and-spending bill-especially the move to cut EV subsidies-calling it a "disgusting abomination." Trump, retaliating on his Truth Social platform, declared he would strip Musk's companies of all government subsidies and contracts. "Terminate Elon's Governmental Subsidies and Contracts," Trump posted. "I was always surprised that Biden didn't do it!"

The clash turned increasingly personal when Trump was asked if he'd join a scheduled call with Musk to ease tensions. "You mean the man who has lost his mind?" Trump responded, adding he wasn't "particularly interested" in talking to Musk.

Tesla's record crash and partial rebound

The market reacted swiftly. Tesla shares nosedived 14% on Thursday-its biggest one-day loss ever-shedding over $150 billion in value. That crash also hit other stocks: Destiny Tech100 Inc, a major SpaceX stakeholder, fell 13%. According to Ortex, short sellers booked nearly $4 billion in gains, marking the second-largest single-day short-selling profit on record.

Tesla clawed back some ground Friday, rising 5.2% in early trading to $299.46. The modest rebound followed signals from Musk and investor Bill Ackman favoring de-escalation. The White House is reportedly brokering a call between Musk and senior officials to contain the damage.

Political fallout threatens Musk's empire

The dispute has put other Musk-led ventures, including SpaceX and Starlink, under renewed scrutiny due to their reliance on favorable regulatory approvals. The removal of the EV subsidy-worth up to $7,500 per vehicle-could cost Tesla an estimated $1.2 billion annually if passed, according to JPMorgan.

Musk, who donated $300 million to Trump's 2024 campaign, has now turned against the president, accusing him of being ungrateful and out of touch. In a fiery post, Musk even alluded to Trump's ties to the Epstein files, ending his message with:“Have a nice day, DJT!”

Apple also slips as market turmoil spreads

Tesla isn't the only tech titan facing heat. Apple's market cap has dropped 20% this year to $2.99 trillion, pushing it to third place globally. Weak demand in China, AI setbacks, and rising trade tensions under the Trump administration are seen as contributing factors.

Musk under shareholder pressure, leaves government role

Musk recently stepped down from his advisory role in the Trump administration after facing backlash from Tesla shareholders. Initially seen as an amicable split, tensions escalated once Musk criticized the administration's key economic bill and called out inefficiencies that undermine government cost-cutting efforts.

Analysts weigh in: 'White-knuckle period' for Tesla

“This is like a junior high school fight,” said Dan Ives of Wedbush Securities.“They were best friends, now they're frenemies-and that's the last thing Tesla investors want.” He warned that the growing hostility could elevate Tesla's political and reputational risks, making regulatory approvals harder and market reactions more volatile.

Paul Stanley of Granite Bay Wealth Management added,“Given the inherent power of the presidency, this could be very negative for Tesla and Musk.”

Robotaxi rollout: Tesla's next big test

Despite the political drama, Tesla is preparing for the June 12 launch of its much-anticipated robotaxi service in Austin, Texas. This marks a major step in Musk's long-term vision for autonomous mobility and AI innovation.

MENAFN07062025007385015968ID1109647398