Tesla shares slip after Musk says he will create a new political party

Tesla shares fell close to 7% Monday after Elon Musk announced plans to form his own political party, sparking concerns he will become further distracted by politics despite a tumultuous stint in the Trump administration.

During a feud with President Trump over his spending bill, the Tesla chief executive wrote on his social media site, X, that he is starting what he called the America Party. Once close allies, Trump and Musk have recently been clashing over policy and traded jabs on social media.

“When it comes to bankrupting our country with waste and graft, we live in a one-party system, not a democracy,” Musk wrote on X over the weekend. “The America Party is formed to give you back your freedom.”

Whether aligned with Trump or against him, Musk’s involvement with politics has alienated some investors who think his political maneuvering has distracted him from focusing on Tesla’s success.

Tesla shares have fallen more than 22% this year as Musk spent several months at the helm of the White House advisory team called the Department of Government Efficiency. The company’s profit plunged 71% in the first quarter and vehicle sales dropped year over year.

Many of Musk’s liberal-leaning customers now denounce the brand in response to his role in the White House. Some celebrities even made a statement by ditching their Teslas. The resale value of used Teslas plummeted early this year, indicating a possible decrease in demand.

Investors breathed a sigh of relief in May when Musk officially stepped down from his job in the federal government, but the subsequent fallout with Trump has continued to damage his company’s reputation.

Musk’s latest move to establish his own political party suggests the tech billionaire is not backing down from a high-profile role in Washington.

“I am saddened to watch Elon Musk go completely ‘off the rails,’ essentially becoming a TRAIN WRECK over the past five weeks,” Trump wrote on Truth Social on Sunday. “He even wants to start a Third Political Party, despite the fact that they have never succeeded in the United States.”

Wedbush Securities analyst Dan Ives predicted that 5% to 10% of the brand damage sustained during Musk’s time in the White House will be permanent. The impact spread outside the U.S. to Europe, where monthly sales in 32 countries fell nearly 50% in April.

“Tesla shareholders are exhausted,” Ives said in an interview Monday. “They need him to focus on Tesla. It’s a soap opera that doesn’t feel like it’s ending anytime soon.”

Tesla shares closed Monday at $293, down 6.7%.