Tesla Inc (NASDAQ: TSLA) is crumbling under pressure after the US President Donald Trump signalled plans to terminate billionaire Elon Musk’s government contracts and subsidies.
“The easiest way to save money in our budget is to terminate Elon’s governmental subsidies and contracts. I was always surprised that Biden didn’t do it,” Trump wrote in his latest post on Truth Social.
The US President’s punitive response follows TSLA chief executive’s derogatory remarks against his “One Big Beautiful Bill Act,” which he went as far as calling a “disgusting abomination” in one of his recent posts.
Tesla shares were down 14% to $284.70 on Thursday. With this, the stock is down nearly 25% in 2025.
Why Trump says Musk is against the spending bill
Musk’s only problem with the pending spending bill is that it “took away his EV mandate that forced everyone to buy electric cars that nobody else wanted,” Trump argued in his post on social media.
EV tax credits first put in place under the Biden administration have historically bolstered Tesla’s sales by reducing the overall cost of buying an electric vehicle for consumers.
The proposed elimination of these incentives in Trump’s tax-and-spending bill could, therefore, hurt demand for EVs, potentially hurting Tesla’s revenue, which was already down 9% on a year-over-year basis in Q1.
The new tax bill would eliminate the $7,500 tax credit for Tesla vehicles in 2025, seven years ahead of schedule.
According to JP Morgan analysts, this would put a $1.2 billion dent in Tesla’s full-year profits.
Additionally, Tesla has benefited from substantial federal support, such as a $465 million loan from the Department of Energy. So, the loss of these government-backed advantages could challenge TSLA’s financial stability and growth prospects, potentially leading to pressure on the EV stock.
Why Musk says he’s against the spending bill
According to Elon Musk, he wants the US Senate to “kill the bill” primarily because it threatens a further worsening of the fiscal deficit, and undoes his work at the Department of Government Efficiency.
However, even if his concern is restricted to the potential impact of Trump’s “One Big Beautiful Bill Act” on Tesla only, it makes sense since removal of the EV tax credits could be a “monkey wrench” for the EV maker, as per William Blair analyst Jed Dorsheimer.
And while Tesla Inc. sales have recently started showing signs of a pickup in certain regions, the multinational is still not in a place to contend with anything that threatens its top-line growth.
Note that the Trump-Musk feud arrives only days before TSLA is scheduled to launch its much-anticipated robotaxi services in Austin.
While the pullback in Tesla stock following Trump’s retaliatory remarks may look to some like a buying opportunity, Wall Street recommends caution.
According to TipRanks, TSLA is only a “hold” rated stock, and the analysts’ average price target of about $292 does not currently signal meaningful upside from current levels.
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