Unlock the White House Watch newsletter for free
Your guide to what Trump’s second term means for Washington, business and the world
Tesla’s market value suffered its biggest one-day drop on record on Thursday as an escalating feud between Donald Trump and Elon Musk triggered a sharp sell-off in the carmaker’s shares.
The electric vehicle group’s shares closed down more than 14 per cent, erasing $153bn from its market capitalisation, after the US president signalled he could terminate US government contracts with Musk’s companies.
“The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts,” Trump wrote on his platform Truth Social.
Thursday’s drop left Tesla’s share price down 25 per cent since the start of the year.
The spat between two of the world’s most powerful men included repeated barbs from Musk on his platform X and Trump’s comment that the billionaire, who has been a close ally since the election, was “wearing thin”.
The Tesla sell-off reverberated through US stock markets, with the S&P 500 and the tech-heavy Nasdaq Composite ending the session down 0.5 per cent and 0.8 per cent respectively. Both indices began to decline at around midday, when Trump and Musk began exchanging insults.
The pair’s “petulant drama shook up the stock market”, said Mike Zigmont, co-head of trading and research at Visdom Investment Group. “The bond market didn’t care, nor should it.”
Tesla investors have had a rollercoaster few months. The stock rallied hard in the final quarter of last year after Trump won his second term as president, but fell between mid-December and early March amid a broader market sell-off fuelled by Trump’s trade war.
Shares in rivals to Musk’s space exploration group SpaceX and its satellite broadband network subsidiary Starlink rose on Thursday as Tesla fell. AST SpaceMobile gained 7.5 per cent while communications group EchoStar jumped 17.4 per cent.
The breakdown of Musk’s relationship with Trump comes as his public interventions in European politics, including support for far-right parties, have contributed to falling car sales across Europe.
In March, JPMorgan strategists wrote in a note to clients that they “struggle[d] to think of anything analogous in the history of the automotive industry, in which a brand has lost so much value so quickly”.
The cuts Musk made to federal government spending as head of the so-called Department of Government Efficiency also sparked a backlash. The Tesla boss stepped back from his government role at the end of May, having blamed “blowback” against his businesses.
Some investors said the market should have anticipated Musk’s feud with Trump, despite their earlier bonhomie. Renowned short seller Jim Chanos said on X that it was the “Most. Predictable. Breakup. Ever.”
Read the full article here
