Tesla (TSLA) shares dropped sharply Monday, falling over 7% by mid-morning, after a whirlwind weekend in which CEO Elon Musk announced the formation of a new political party and U.S. policies eliminated key electric vehicle incentives.
The decline comes at a pivotal time for Tesla, which is facing weakening demand in key global markets, declining EV subsidies, and intensifying competition—especially in China.
Musk forms “America Party”
On Saturday, Musk posted on X (formerly Twitter) that he is launching the “America Party” after polling his followers on the need for political alternatives. “We live in a one-party system, not a democracy,” he wrote. “Today, the America Party is formed to give you back your freedom.”
Market analysts see the announcement as a distraction from Tesla’s core business.
“Musk diving deeper into politics is exactly the opposite direction that Tesla shareholders want him to take,” said Dan Ives, tech analyst at Wedbush.
This political move follows Musk’s previous resignation from the Trump-aligned Department of Government Efficiency (DOGE), which investors initially viewed as a positive for Tesla’s focus.
EV tax credits repealed
The blow to Tesla wasn’t limited to Musk’s political maneuvering. Over the weekend, President Trump signed a sweeping tax bill that eliminates the $7,500 federal EV tax credit after September 30, 2025.
That law also:
- Immediately ends zero emission vehicle (ZEV) credit sales—a key source of revenue for Tesla.
- Increases tariffs on imported Chinese EV components, raising Tesla’s costs.
Tesla will likely see a short-term boost in Q3 as buyers rush to qualify for remaining credits. But analysts predict a sharp drop in U.S. sales after October, especially for models that heavily relied on the incentive.
Robotaxi rollout shadowed by minor incident
Tesla’s June 22 launch of its robotaxi fleet in Austin, Texas—while a long-term bet—has had a bumpy start. Most rides have been smooth, but over the weekend one vehicle brushed a parked Toyota Camry while attempting to self-park.
While minor, the incident adds to skepticism over removing human monitors. Tesla must prove safety and scale to compete with ride-share incumbents like Uber, which has surged nearly 12% since the Tesla robotaxi launch.
Global competition ramps up
Tesla’s international position is also under pressure:
- China’s Xiaomi YU7, a new crossover, began deliveries Sunday with over 200,000 pre-orders in minutes. It’s seen as a direct threat to the Tesla Model Y.
- Xiaomi’s SU7 sedan is already outselling the Model 3 in China.
- Tesla’s European market share continues to erode amid newer, cheaper competitors.
Stock technicals and outlook
Tesla stock fell 6.6% to $292.85 in early trading. This puts TSLA below the July 1 support level of $293.21, raising the risk of a deeper correction. Key watch points include:
- $273.21 (June 5 low) as next support
- Potential base-building if shares stabilize above $285
The stock had gained earlier in Q2 on delivery optimism and reduced political noise. That trend has reversed.
What investors are watching
- Will Musk step back from political distractions?
- Can Tesla maintain margins without ZEV credits?
- Will robotaxi progress offset declining sales?
- Can Tesla fend off competition from Xiaomi and others?
Tesla faces headwinds on multiple fronts—political, financial, and technological. Analysts say the company’s near-term outlook will depend heavily on Q3 sales, response to EV subsidy loss, and Musk’s ability to refocus on the core business.
This content is brought to you by the FingerLakes1.com Team. Support our mission by visiting www.patreon.com/fl1 or learn how you send us your local content here.