Tesla stock falls 7% after Musk launches political party

Tesla shares dropped 7% in premarket trading on July 7, after CEO Elon Musk announced a new political party called the “America Party.”

Musk said the party will target a limited number of Senate and House seats to ensure laws reflect “the true will of the people.”

Investors are concerned about Musk’s growing political involvement.

Earlier this year, he joined the Department of Government Efficiency (DOGE) and worked with President Donald Trump, a move that drew criticism for potentially harming Tesla’s brand.

Musk left the department in May, which was followed by a stock recovery.

Dan Ives of Wedbush Securities said, “This is the opposite direction Tesla investors want him to take during a critical period for the company.”

Meanwhile, Tesla is facing other challenges, including a 14% year-on-year drop in second-quarter car deliveries, falling short of market expectations amid rising competition in China.

🔗 Source: CNBC

🧠 Food for thought

1️⃣ Tesla’s performance suffers when Musk’s focus shifts to politics

This is the third time since 2023 that Musk’s political activities have coincided with Tesla stock pressure, raising concerns for investors.

When Musk joined Trump’s Department of Government Efficiency earlier this year, Tesla’s brand perception declined, with over 40% of consumers in key markets viewing the brand less favorably due to his political persona1.

His departure from DOGE in May 2025 led to a temporary stock recovery, reflecting investor preference for a CEO focused on core business challenges2.

The timing of his “America Party” announcement coincides with Tesla reporting a 13.5% year-on-year sales decline in Q2 2025—its largest drop in company history—with only 384,122 vehicles delivered3.

Dan Ives, a prominent Tesla analyst, has noted “broader sense of exhaustion from many Tesla investors that Musk keeps heading down the political track” during what he calls “this crucial period for the Tesla story”2.