What Are the Implications for Tesla If Musk Prioritizes Politics Over Automobiles?

Tesla is Elon Musk. Elon Musk is Tesla. Rarely has a company’s identity been so inextricably linked to its CEO, for better and for worse. For years, this fusion was a superpower, giving Tesla an innovative mystique that captivated investors and propped up its valuation. Now, that same connection has become a massive liability.

In a brutal reaction to Elon Musk’s latest political bombshell—the launch of his own political party—investors wiped nearly $70 billion off Tesla’s market capitalization in a single trading session on Monday. The immediate cause was Musk’s chaotic weekend, which saw him create the “America Party” just days after a fiery public split with President Donald Trump.

This single-day loss is part of a much larger implosion. After peaking near $1.5 trillion following the 2024 election, Tesla has seen its market value collapse. In just over six months, more than $350 billion of its valuation has vanished as Musk’s political activism alienates the company’s core customers and spooks Wall Street.

The problem for Tesla is that the “Musk magic” has long masked fundamental business weaknesses. The company’s portfolio of five models is widely seen as aging. While competitors like China’s BYD and America’s General Motors release a diverse range of new and affordable models, Tesla has not launched a mass-market vehicle in years. Its much-hyped Cybertruck has been a commercial disappointment, and its lead in the EV market has evaporated.

For years, Musk could distract from these issues with the promise of the future. Take his robotaxi service, for example. Even though Google’s Waymo is the established leader in autonomous driving, Musk’s announcement of a Tesla robotaxi service—launched with much fanfare on June 22—had analysts immediately predicting Tesla’s dominance. The reality, however, is a service that operates in a small, geographically fenced-off area in Austin, Texas, with a human supervisor in the passenger seat. Videos posted online show a significant performance gap still exists between Tesla and its more established rivals.

Now, Musk’s political war is adding a new layer of risk at the worst possible time. After spending a reported sum of nearly $290 million to help Donald Trump return to the White House, Musk’s role as the head of the administration’s “Department of Government Efficiency” (DOGE) and his subsequent, spectacular fallout with the President have put Tesla in the political crosshairs.

His new “America Party” is a direct challenge to a Trump administration whose signature “One Big Beautiful Bill” eliminated the federal EV tax credits that have been crucial for Tesla’s sales. With those $7,500 credits set to expire on September 30, it’s unclear how Tesla will compete on price, especially with an alienated customer base.

While Musk wages his political battles, Tesla is left with an aging product line, fierce competition, and a customer base that is increasingly turned off by its CEO’s behavior. The company desperately needs its visionary leader to solve its mounting problems, from developing its Optimus robot to refreshing its car models. Instead, it has a distracted CEO picking fights in Washington.

“Musk is Tesla. Tesla is Musk, Tesla’s biggest asset,” Wedbush Securities analyst Dan Ives reiterated on Monday. As the veteran analyst noted, Musk is both the company’s biggest asset and its biggest risk.

🚨 Wedbush's Dan Ives: " Musk is Tesla. Tesla is Musk, the biggest asset of Tesla."@DivesTech says Elon Musk is Tesla’s biggest strength, but also a big risk! His political actions might scare some investors and hurt Tesla in key places like China.

Can Elon stay focused on… pic.twitter.com/C9SMg7tChB

— Herbert Ong (@herbertong) July 7, 2025

Right now, with billions bleeding from the company’s value, Musk is proving to be a risk that many investors are no longer willing to take.