Elon Musk political gambit: The cost paid by his Tesla Empire

Elon Musk, the world’s richest man and a titan of innovation, has long been a polarizing figure. His ventures Tesla, SpaceX, and X have redefined industries, but his latest foray into politics is proving a costly detour.

Once hailed as a visionary who could do no wrong in the eyes of investors, Musk’s deepening entanglement in U.S. and global political arenas is now dragging Tesla’s stock into a tailspin, erasing billions in market value and threatening his personal fortune. As of today, Tesla shares have plummeted, reflecting a market recoiling from the risks of Musk’s controversial political stances.

The Trump Effect

Musk’s political journey took a sharp turn with his vocal support for Donald Trump’s 2024 presidential campaign. Pouring over $250 million into Trump’s victory through a super PAC, Musk didn’t stop at funding, he became a fixture in Trump’s orbit, co-heading the Department of Government Efficiency (DOGE) alongside Vivek Ramaswamy. Initially, this alliance sparked a euphoric rally in Tesla’s stock, peaking at $479.86 on December 17, 2024, as investors bet on regulatory favors and tariff carve-outs for Tesla under a Trump administration.

But the honeymoon was short-lived. By March 4, 2025, Tesla shares have cratered to $290.80, a 37% drop from that high, slashing the company’s valuation below $1 trillion for the first time since November 2024. The decline has shaved nearly $130 billion off Musk’s net worth, though he remains atop the Bloomberg Billionaire Index at $358 billion. What went wrong? Analysts point to a confluence of factors, with Musk’s political involvement at the heart of the storm.

Trump’s ambivalence toward electric vehicles (EVs)—calling them a “failed experiment” and vowing to rollback EV incentives, clashes with Tesla’s core mission. While Musk’s “first buddy” status with Trump might secure Tesla-specific exemptions, the broader anti-EV rhetoric has spooked investors. “The worry is that Musk’s dedication to DOGE distracts him from Tesla at a pivotal moment,” wrote Wedbush analyst Dan Ives in a February note. “His political capital may not outweigh the policy headwinds.”

Europe’s Backlash: A Brand in Crisis

Across the Atlantic, Musk’s political meddling has ignited a firestorm, hammering Tesla’s sales and reputation. In Germany, his public support for the far-right Alternative für Deutschland (AfD) party congratulating its leader after a strong electoral showing coincided with a 59% plunge in Tesla sales in January 2025, per the German Federal Motor Transport Authority. In the UK, Musk’s inflammatory X posts during far-right riots “Civil war is inevitable” and his backing of jailed activist Tommy Robinson have fueled consumer backlash. Tesla registrations in the UK fell 12% in January, despite record EV growth.

Posts on social media reflect the sentiment shift: “Musk’s politics are making Tesla toxic, can’t justify buying one now,” wrote one user. Another quipped, “His rhetoric has turned a pioneer brand into a pariah.” Surveys back this up, Electrifying.com found 59% of UK car buyers were deterred from Tesla by Musk’s actions, while in Germany, owners slap “Elon went nuts” stickers on their cars to distance themselves.

The numbers tell a stark story. Tesla’s European sales dropped 45% in January 2025, per Jato Dynamics, even as the continent’s EV market surged 34%. Competitors like BYD and Volkswagen seized the moment, rolling out cheaper, feature-rich models that eroded Tesla’s once-dominant share. “Musk is alienating the very demographic progressive, eco-conscious buyers that built Tesla,” says Martin Fassnacht, a marketing expert at WHU Otto Beisheim School of Management. “It’s a self-inflicted wound.”

Investor Jitters: A Leadership Vacuum

Wall Street, once enthralled by Musk’s charisma, is growing restless. Tesla’s stock slide down 25% year-to-date by March, mirrors mounting concerns over his divided focus. Running Tesla, SpaceX, X, and now DOGE, Musk’s time is stretched thin, and Tesla’s lackluster performance shows it. Global sales fell 1% in 2024, the first annual decline in over a decade, while Q4 earnings missed expectations, triggering a 6% share drop in January.

Ross Gerber CEO Gerber Kawasaki. Photo Credit: Gerber Kawasaki

“Musk’s political antics are a distraction Tesla can’t afford,” says Ross Gerber, a longtime Tesla investor with $60 million in holdings. Gerber, who’s called for new leadership, warns the stock could halve if Musk doesn’t refocus. The robotaxi unveiling in October 2024 a glitzy spectacle promising autonomous driving breakthroughs failed to stem the tide, with investors skeptical of Musk’s timelines. “He’s married the world’s best product to the world’s worst marketing,” Gerber told Business Insider in February

Tesla’s silence on Musk’s political impact in its latest annual report listing every risk from battery fires to wars but barely mentioning his right-wing pivot has only fueled unease. “It’s Marketing 101: don’t wade into politics,” says brand consultant Robert Passikoff. “People stop buying when the CEO becomes the story.”

Tesla’s brand, once a liberal darling synonymous with sustainability, is fracturing along political lines. In the U.S., Data for Progress polling shows 59% of Democrats are now “much less likely” to buy a Tesla due to Musk, compared to just 15% of Republicans. Anecdotes abound: Tesla owners in California and D.C. plaster “Up with EVs, down with Elon” stickers on their cars, while protests outside showrooms decry Musk’s “government takeover.”

Tor Martin Flesvik - Chairman Knightsbridge Associates

In Europe, the backlash is sharper. “I won’t buy a Tesla again,” Jens Fischer, a German salesman, told PBS, citing Musk’s “destabilizing” influence. In progressive strongholds like California, Tesla’s market share slipped 1% in blue states last year as rivals like Polestar lure disaffected buyers with discounts. Yet Musk’s GOP alignment may boost sales among conservatives Republicans now outpace Democrats as new Tesla owners, potentially offsetting some losses.

Knightsbridge Associates Chairman Tor Martin Flesvik adding ''Tesla’s current 34% decline in the share price reflects two critical considerations. First, it underscores the possibility that the stock was overvalued relative to its fundamentals. Second, it highlights the growing risk associated with CEO Elon Musk’s increasingly visible engagement in both U.S. and European political discourse. Musk’s public statements, including social media activity, have historically triggered double-digit percentage swings in Tesla’s share price, illustrating the market’s sensitivity to his rhetoric.

And for the record, Elon Musk remains an exceptional entrepreneur and visionary, with a track record of innovation across industries'' Tor Martin says.

Notably, institutional investors are increasingly weighing Tesla’s risk-reward profile, with many expressing concerns about Musk’s polarizing political alignment and its potential to amplify volatility. While retail investors previously gravitated toward Tesla in anticipation of Musk leveraging his influence to advance favorable EV policies, such as subsidies - this thesis appears flawed. A growing segment of consumers may now be dissuaded from purchasing Tesla vehicles due to Musk’s political affiliations, which are perceived as closely tied to the Republican Party. Furthermore, Tesla’s brand identity has become inextricably linked to Musk’s persona, transforming the stock into a proxy for his “rockstar CEO” approach. This dynamic introduces heightened risk, as corporate governance and long-term stability may be overshadowed by Musk’s individual actions. - And for the record, Elon Musk remains an exceptional entrepreneur and visionary, with a track record of innovation across industries'' Tor says.

Musk’s political plunge has cost him dearly. Tesla’s $550 billion market value loss since January 2025, reflects a brand battered by his polarizing persona. His fortune, tied to a 13% stake in Tesla, has taken a hit, though SpaceX’s $350 billion valuation cushions the blow. Critics argue Musk’s long-term vision with Mars colonization, autonomous driving, transcends politics, but the short-term damage is undeniable.

As one social media user put it, “Elon built Tesla to save the planet, then torched its goodwill for a seat at Trump’s table.” The market, it seems, agrees.