When Titans Clash: The Tesla Stock Meltdown and Musk’s Latest War

doge musk tesla

The relationship between Donald Trump and Elon Musk has always been a study in contradictions, but their latest public feud has sent shockwaves through Wall Street that go far beyond typical political theater.

Tesla’s stock plummeted more than 7% on Tuesday, wiping billions from the electric vehicle maker’s market value as investors watched the world’s most powerful politician and richest man tear each other apart on social media.

This isn’t just another Twitter spat between two oversized egos. The stakes are existential for Musk’s business empire, which depends heavily on federal contracts, subsidies, and regulatory approvals that Trump now controls. What started as policy disagreements over Trump’s massive spending bill has escalated into personal threats that could reshape the future of American innovation.

The Spark That Lit the Fire

The current explosion traces back to Trump’s “One Big Beautiful Bill,” a sweeping piece of legislation that would eliminate the$7,500 electric vehicle tax credit while adding an estimated $4 trillion to the national debt] (https://www.latimes.com/politics/story/2025-07-01/trump-musk-doge-megabill) over the next decade. For Musk, who built Tesla partly on the foundation of government incentives for clean energy, this represents both a financial blow and a philosophical betrayal.

Tesla could lose an estimated$1.2 billion in annual profit from the elimination of EV tax credits, but Musk’s opposition runs deeper than immediate financial concerns. Having led the Department of Government Efficiency (DOGE) until late May, he views the bill as a fundamental contradiction of the fiscal responsibility he was hired to champion.

“Every member of Congress who campaigned on reducing government spending and then immediately voted for the biggest debt increase in history should hang their head in shame,” Musk wrote on X, threatening to fund primary challenges against supporters “if it is the last thing I do on this Earth.”

Trump’s Nuclear Response

Trump’s retaliation was swift and brutal. In a series of Truth Social posts that began at 12:34 AM on Tuesday, the president attacked the very foundation of Musk’s business empire. “Elon may get more subsidy than any human being in history, by far, and without subsidies, Elon would probably have to close up shop and head back home to South Africa,” Trump wrote.

The threat wasn’t merely rhetorical. Trump suggested using DOGE itself to investigate Musk’s companies, creating the surreal possibility of the cost-cutting department Musk once led being turned against him. “Perhaps we should have DOGE take a good, hard, look at this? BIG MONEY TO BE SAVED!!!” Trump added.

By Tuesday morning, Trump had escalated further, telling reporters he might “take a look” at deporting Musk, a naturalized U.S. citizen. “We might have to put DOGE on Elon,” Trump said with a smile. “You know what DOGE is? DOGE is the monster that might have to go back and eat Elon.”

The Market’s Verdict

Wall Street’s response was immediate and unforgiving. Tesla shares closed down 5.3% at$300.71, extending the stock’s year-to-date decline to nearly 25%. The selloff erased billions in market value, reminiscent of the previous Trump-Musk clash in June that wiped$150 billion from Tesla’s valuation in a single day.

The market’s reaction reflects deeper concerns about the regulatory risks facing Musk’s empire. Tesla’s future hinges on federal approval for its robotaxi program, while SpaceX holds approximately$22 billion in government contracts. The Transportation Department, which Trump controls, will determine whether Tesla can mass-produce autonomous vehicles without traditional controls like steering wheels and pedals.

“Musk cannot stop himself. He is getting on Trump’s bad side again,” said Dennis Dick, chief strategist at Stock Trader Network. “Tesla international sales have fallen significantly and if he loses U.S. subsidies, U.S. sales are likely to fall as well.”

Beyond the Bluster: Real Business Consequences

The feud comes at a particularly vulnerable moment for Tesla. The company has lost market share in key regions, with U.S. market share dropping 9 percentage points, European share falling 8 percentage points, and Chinese share declining 3 percentage points through April. This decline occurred even as global electric vehicle sales surged 38% in the same period.

Wall Street analysts have responded by slashing earnings forecasts. Consensus estimates for 2025 and 2026 have dropped by 25% and 16% respectively in the last three months, making Tesla’s current valuation of 145 times adjusted earnings look increasingly untenable.

The political dimension adds another layer of complexity. Musk’s embrace of Trump initially alienated Democratic buyers, while his current criticism of the Republican agenda risks losing conservative supporters. “Elon’s politics continue to harm the stock,” noted Tesla shareholder Dennis Dick.

The Broader Stakes

This isn’t just about two billionaires settling scores on social media. The conflict represents a fundamental tension in American capitalism between private innovation and public support. Musk built his empire partly through government contracts and incentives, from NASA partnerships that saved SpaceX to EV tax credits that boosted Tesla sales.

Trump’s threats to weaponize federal agencies against Musk would represent an unprecedented use of government power against a private citizen, even one as prominent as the world’s richest man. The irony that DOGE, created to reduce government waste, might be used to investigate its former leader adds a darkly comic element to the proceedings.

For investors, the message is clear: political risk has become a permanent feature of the Musk investment thesis. The man who once seemed to transcend traditional political boundaries now finds himself caught between them, with his business empire hanging in the balance.

What Comes Next

Wedbush analyst Dan Ives, who maintains an “outperform” rating on Tesla with a$500 price target, believes the situation will eventually settle because “Musk needs Trump and Trump needs Musk given the AI Arms Race going on between the US and China.” But he acknowledges the ongoing drama is “wearing thin with shareholders.”

The immediate test comes Wednesday when Tesla reports second-quarter delivery figures. Analysts expect another rough quarter, with forecasts calling for an 11% year-over-year decline. Poor numbers could amplify the political pressure and send the stock even lower.

Meanwhile, Musk has hinted at forming a new political party if Trump’s bill passes, threatening to challenge the entire Republican establishment. “Our country needs an alternative to the Democrat-Republican uniparty so that the people actually have a VOICE,” he wrote on X.

The spectacle of America’s most successful entrepreneur potentially going to war with its most powerful politician would have seemed like science fiction just a few years ago. Today, it’s just another Tuesday in the age of social media politics, where fortunes can be made or lost with a single post, and the line between governance and entertainment has all but disappeared.

For Tesla shareholders, the lesson is sobering: when you invest in Elon Musk, you’re not just buying into electric vehicles or space exploration. You’re betting on the political survival of a man who seems constitutionally incapable of backing down from a fight, even when the opponent controls the levers of federal power.