Musk is once again caught in a political whirlpool, igniting investor anxiety! Tesla plummets in pre-market trading

According to the Zhitong Finance APP, concerns have been raised among investors about whether Tesla (TSLA.US) CEO Elon Musk is still focused on the future development of the electric vehicle manufacturer after he announced plans to establish a new political party. As of the time of writing, Tesla's stock fell over 6% in pre-market trading on Monday.

On July 5 local time, Musk posted on social media that the "American Party" was established that day and expressed his dissatisfaction with the so-called "Big and Beautiful" tax and spending bill promoted by U.S. President Donald Trump.

It is reported that the U.S. House of Representatives passed the "Big and Beautiful" bill on July 3 local time with a vote of 218 in favor and 214 against. Trump signed the bill into law on July 4, making it effective. The bill has been controversial due to its cuts to federal aid, increase in long-term debt, and tax cuts for the wealthy and large corporations. Musk had previously criticized the bill harshly and stated that if it passed, he would establish the "American Party" the next day.

When asked about Musk's announcement of the new political party, Trump stated that Musk "can find some fun in it," but he considered it "absurd." Trump posted on social media on July 6, expressing concern over seeing Musk completely "derailed" over the past five weeks, essentially falling into a "train-wreck-like" disastrous situation, which he found "sad."

As Tesla's delivery numbers declined for the second consecutive quarter, Musk's announcement of the new political party marked an escalation of conflict between him and Trump, further undermining investor confidence in the stock, which has already fallen over 21% this year.

Neil Wilson, an investment strategist at Saxo Markets UK, stated, "Investors are worried about two things: first, Trump's anger may affect the government subsidies Tesla can receive, and second, and more importantly, Musk may become distracted."

Musk provided nearly $300 million in funding to Trump and other Republicans last year. However, after Musk's excessive involvement in political affairs damaged Tesla's brand reputation and further led to a continuous decline in Tesla electric vehicle sales, Musk stated in May this year that he would reduce political spending and refocus on business operations. This alleviated investors' concerns about his focus and government relations.

Neil Wilson added, "Investors welcomed Musk's withdrawal from the political front, but now they are worried that he will be drawn into the political vortex and neglect Tesla."

Investor unease quickly surfaced after Musk announced the establishment of the new political party. U.S. investment firm Azoria Partners announced on July 5 that it would delay the listing of its Azoria Tesla Convexity ETF. Azoria had originally planned to launch the Tesla ETF soon, which would invest in the stocks and options of the electric vehicle company. Azoria CEO James Fishback posted several critical comments about the new political party on social media and reiterated his support for President Trump. James Fishback stated, "I encourage the (Tesla) board to meet immediately and ask Elon to clarify his political ambitions and assess whether these ambitions align with his full-time responsibilities as CEO of Tesla." Wedbush analyst Dan Ives, who has been bullish on Tesla for a long time, stated that Musk's involvement in political activities at this critical juncture is undoubtedly the worst timing for his business. Tesla is at a crucial stage of launching its highly anticipated autonomous taxi service. Dan Ives and other Wall Street analysts believe this business could bring hundreds of billions or even trillions of dollars in value to Tesla. More importantly, Tesla also plans to begin mass sales of humanoid robots in 2026.

Dan Ives said, "It's simple, Musk's deeper dive into the political arena at this time, even attempting to challenge the entrenched interests in Washington, is completely contrary to the expectations of Tesla investors and shareholders during this critical period." He added, "While Musk's staunch supporters will support him regardless, many Tesla investors generally feel fatigued because Musk keeps straying further down the political path. After Musk left the Department of Government Efficiency (DOGE), Tesla shareholders and many steadfast supporters initially felt relieved, thinking Tesla had regained its greatest asset—Musk himself. But this sense of relief was very short-lived, and with the latest news announcement, the situation has actually worsened."