Electric vehicle (EV) maker Tesla (TSLA) lost nearly $153 billion in market value in one of its worst trading days yesterday, as its share price fell by 14.3%. A heated war of words and an escalating public feud between CEO Elon Musk and friend-turned-foe President Donald Trump led to Tesla’s downfall. Trump accused Musk of suffering from “Trump derangement syndrome” for opposing the new tax bill, while Musk fired back, stating, “Without me, Trump would have lost the election.”
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As the verbal war escalated, the President even threatened to cancel billions of dollars in government contracts with Musk’s companies, particularly SpaceX. In response, Musk issued an equally threatening statement, “Will begin decommissioning its Dragon spacecraft immediately.” But everyone knows how Musk can make a bold comment and walk it back just as easily. A couple of hours later, he replied to a concerned post urging him to cool off, saying, “Good advice. OK, we won’t decommission Dragon.” Musk couldn’t possibly decommission the Dragon capsule, because it is also used to ferry passengers on commercial spaceflights.
What Caused the Collapse?
It all started after Musk rebuked Trump’s “Big, Beautiful Bill” for excluding EV credits and further increasing the U.S. deficit. Last week, Musk announced his exit from the Department of Energy Efficiency (DOGE) Committee, which was also responsible for cutting down on wasteful government spending. He has since returned to focusing full-time on his companies and is facing a looming deadline of launching his much-awaited robotaxi service in Austin, Texas, on June 12.
Meanwhile, Musk’s close ties with Trump during the pre-election period and post his victory have cost Tesla several billions of dollars in lost revenue. Tesla’s auto sales have been losing ground in China, Europe, and the UK due to growing backlash against Musk, intense competition, and a heated price war. All of this has also significantly impacted Tesla’s stock price.
What’s Behind the Dragon Capsule Decommissioning Threat?
During the ensuing barrage, Trump wrote in one of his Truth Social (DJT) posts, “The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts.”
Boeing’s (BA) Starliner failed to safely transport two astronauts to the International Space Station (ISS) and return them. Currently, SpaceX’s Dragon capsule remains the only viable option for flying NASA’s astronauts and cargo to and from the ISS. Since 2008, SpaceX has won up to $20 billion in federal contracts from NASA, the U.S. Air Force, and other government agencies. By threatening to decommission the Dragon spacecraft, Musk may have intended to catch the President unawares but later walked back his statement.
It remains to be seen whether Trump and Musk resume their intense spat today. Enough damage has already been done to shareholders and investors overall, as Tesla’s stock price decline dragged down the broader indices. To be fair, both have larger roles to play, with Musk steering Tesla back on track to operate a successful business, and Trump leading the world’s largest economy out of recession fears.
Is Tesla a Good Share to Buy?
On TipRanks, TSLA stock has a Hold consensus rating based on 16 Buys, 10 Holds, and 11 Sell ratings. Also, the average Tesla price target of $282.70 implies that shares are almost fully valued at current levels. Year-to-date, TSLA stock has lost 29.5%.
