Elon Musk’s push to create a third political party is putting his business empire at risk once again, raising questions about how his political ambitions align with the interests of his companies.
After the tech billionaire launched his new America Party over the weekend, Tesla saw its shares tumble Monday — the latest occasion in recent months in which the electric vehicle (EV) maker has taken a hit over its CEO’s actions in the political sphere.
And President Trump has renewed his suggestion that the administration could take aim at Musk’s various contracts and subsidies, leaving the vast sums of government money that SpaceX receives vulnerable.
“This turn is probably one of the biggest strategic errors I’ve ever seen,” Ross Gerber, a longtime Tesla investor and CEO of Gerber Kawasaki Wealth and Investment Management, told The Hill.
“This now puts them [Musk and Trump] in direct combat in a way that will only hurt Tesla even more,” he added.
Tesla’s stock fell a sharp 7 percent Monday morning when markets opened and investors took stock of Musk’s decision to launch his America Party.
The Tesla CEO has repeatedly floated the idea of creating a third party since his falling out with the president last month. As the two men reignited their feud last week over Trump’s sweeping tax and spending bill, Musk reiterated his proposal.
After polling his followers on his social platform X, Musk announced Saturday he was moving forward with plans for the America Party.
“When it comes to bankrupting our country with waste & graft, we live in a one-party system, not a democracy,” he wrote. “Today, the America Party is formed to give you back your freedom.”
Musk’s decision to delve further into politics isn’t sitting well with many investors, who appeared relieved by the tech mogul’s earlier decision to step away from the Trump White House.
James Fishback, CEO and founder of investment firm Azoria, said Saturday that his company was postponing the public listing of a Tesla exchange traded fund (ETF) as a result of Musk’s announcement.
“In May, when Elon stepped back from his work at DOGE and returned his attention to Tesla, we were encouraged,” Fishback wrote on X. “With Elon fully engaged, he gave shareholders renewed confidence in Tesla’s future.”
“Elon’s announcement today undermines that confidence,” he continued.
The Tesla CEO joined the Trump administration after spending at least $250 million to help boost Trump’s 2024 campaign. Investors initially seemed optimistic about what Musk’s role could mean for his companies, with Tesla’s stock rising in the wake of the November election.
However, Musk’s role leading the Department of Government Efficiency (DOGE) quickly became a drag on Tesla, as the EV maker became a political symbol for its CEO and DOGE’s controversial efforts to cut government spending and slash the federal workforce.
Tesla’s stock sank, while the company’s cars and dealerships became targets for both peaceful and destructive protests. The EV firm reported a steep 71 percent drop in earnings in the first quarter and a 13 percent dip in global sales in the second quarter.
Musk ultimately decided to step away from the White House in May, vowing to shift his focus back to Tesla. But he soon became entrenched in a feud with Trump over the reconciliation bill and his concerns about the federal deficit, spurring the threats to create a third party.
“The last thing you want to see is Musk getting into politics at this juncture,” Wedbush Securities analyst Dan Ives told The Hill. “You want him all focused on Tesla. And he’s ultimately creating a foe in the White House with Trump and Republicans.”
“He’s risking a lot,” he added. “It puts Tesla in harm’s way. It creates more uncertainty. And the chances that independents gain any political foothold is very small. So it’s kind of a lose-lose situation from the perspective of many Tesla shareholders.”
Trump and other Republicans have lambasted Musk’s push for a third party. The president slammed his onetime ally as a “train wreck” and suggested he had gone “completely off the rails.”
“He even wants to start a Third Political Party, despite the fact that they have never succeeded in the United States – The System seems not designed for them,” Trump said in a post Sunday afternoon.
Trump’s ire could spell trouble for Musk’s companies, which are highly dependent on government contracts. A Washington Post analysis in February found that his business empire had received at least $38 billion in government contracts, loans, subsidies and tax credits.
The president has on several occasions raised the possibility of targeting the tech mogul’s contracts and subsidies, including last week, as Musk ramped up his attacks on Trump and the reconciliation bill.
“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,” he wrote on Truth Social, adding, “Perhaps we should have DOGE take a good, hard, look at this?”
SpaceX, which has received more than $22 billion in government contracts, is particularly vulnerable to potential cuts.
“I don’t think it ever does any good for somebody like Elon Musk to annoy his biggest customer, which is the United States government,” space policy expert Mark Whittington said.
However, he underscored the government is also highly dependent on SpaceX, making it hard for Trump to realistically cut off the company.
Musk’s threat last month to decommission SpaceX’s Dragon spacecraft, which is responsible for ferrying astronauts and cargo to and from the International Space Station, sent shockwaves through the space community. He ultimately walked back the threat.
“SpaceX is so good at what it does, launching things into space, and is far beyond any of his competitors,” Whittington added. “There’s not much the federal government can do to him without alternatives.”
As a result, SpaceX is in a “better position” than Tesla, Ives said. He argued Tuesday that the Tesla board of directors “must act” to set ground rules for Musk going forward.
He suggested they take advantage of the ongoing legal battle over the Tesla CEO’s current pay package, creating an incentive driven pay package that lays out expectations about the amount of time Musk needs to spend at the company and setting up a special committee to establish rules for his political endeavors.
In turn, the board could increase Musk’s voting control to 25 percent, which Ives said would create a scenario for Tesla to merge with xAI. Musk seemed unenthused by the proposal, writing on X, “Shut up, Dan.”
However, Gerber appeared skeptical that the Tesla board would step in.
“[Musk’s] going to do whatever he wants, and he doesn’t care,” Gerber said. “And the board isn’t going to do anything about it.”
