Trump Calls Former Ally Musk's America Party Idea 'Ridiculous'
Tesla’s stock, which has lost more than 20% this year, is poised to fall further: The company’s shares slumped as much as 7.6% in premarket trading on Monday.
President Donald Trump blasted Elon Musk’s bid to start a new political party, as the intensifying feud between the former allies deepens concerns among investors over the implications for Tesla Inc. and other companies helmed by the world’s richest man.
“Third parties have never worked, so he can have fun with it, but I think it’s ridiculous,” Trump told reporters on Sunday. The US has “always been a two-party system,” he added.
Musk said on Saturday that a new “America Party” he has been threatening to launch “is formed,” a day after Trump signed a tax-cut and spending bill into law that Musk had denounced. He didn’t provide details of the political party and there’s no immediate indication that he has filed official paperwork.
The latest move by Musk signals a longer-term commitment to politics, a development set to further unnerve Tesla investors who have wanted the company’s chief executive officer to focus more on the company.
Tesla’s stock, which has lost more than 20% this year, is poised to fall further: The company’s shares slumped as much as 7.6% in premarket trading on Monday.
Musk’s “major beef” with Trump shows no signs of slowing, and his latest move will likely push the president to further isolate the Tesla CEO from the Oval Office, according to Wedbush analyst Daniel Ives, who noted that there’s some exhaustion related to Musk’s focus on politics.
“Very simply Musk diving deeper into politics and now trying to take on the Beltway establishment is exactly the opposite direction that Tesla investors/shareholders want him to take during this crucial period for the Tesla story,” Ives wrote in a note dated July 6. The “political gamble” may draw Tesla’s board of directors to get involved depending on how far Musk takes it, he added.
The company’s core auto business is facing headwinds around the world, with Musk’s political actions increasingly casting a shadow over the brand. Global sales tumbled 13% in the second quarter, putting Tesla on course for a second consecutive annual decline
In China, it’s facing aggressive competition from the likes of BYD Co. and Xiaomi Corp., which offer newer and more affordable EVs. Shipments from Tesla’s Shanghai factory recently rose for the first time in eight months, but at an incremental 0.8% pace.
Tesla has taken an even bigger hit in Europe, which has emerged as its weakest major market. In May, the company’s overall sales in the region slid for a fifth consecutive month, falling almost 30%, while the broader EV market expanded.
Musk and Trump had a dramatic falling out in early June, days after the Tesla CEO exited his role heading the Department of Government Efficiency initiative to cut federal spending. After appearing to back off, Musk last week renewed his criticism of the president’s spending bill, on the grounds that gave “handouts to industries of the past while severely damaging industries of the future,” and would raise the federal debt ceiling by $5 trillion.
‘Off the Rails’
Musk in May exited the administration in a dramatic blowup with Trump that ended his role heading the Department of Government Efficiency drive to cut federal spending. After initially appearing to back off his feud with Trump, Musk last week renewed criticism of the president’s “insane” spending bill. He said it gave “handouts to industries of the past while severely damaging industries of the future,” and would raise the federal debt ceiling by $5 trillion.
Musk made the announcement of a new “America Party” on his X social network after posting the results of a poll on the platform that he said showed 65% of respondents in favor of doing so. He said one way to break the two-party system would be to focus on winning a small number of Senate and House seats in order to serve as the deciding vote on contentious laws.
Later on Sunday, Trump amplified his comments in reaction to the new party in a post on his Truth Social network, saying he was “saddened to watch Elon Musk go completely ‘off the rails’” over the past five weeks. Trump also touted his budget package that “unfortunately for Elon” eliminates the electric vehicle subsidy.
Treasury Secretary Scott Bessent suggested Sunday that Musk should stick to business rather than politics.
“I believe that the boards of directors at his various companies wanted him to come back and run those companies, which he is better at than anyone,” Bessent said in reply to a question on CNN’s State of the Union.
“So I imagine that those board of directors did not like this announcement yesterday and will be encouraging him to focus on his business activities, not his political activities,” Bessent said.
Third Parties
While independent candidates periodically win seats in the Senate and House of Representatives, third parties have traditionally struggled to gain traction in the US’s winner-take-all political system. Ross Perot’s presidential bid for the Reform Party in 1996 marked a high-water point for third-party candidates in presidential elections, when he captured about 8% of the popular vote but failed to win any states.
Not all investors opposed Musk’s move to create a party. Jason Hsu, CIO at Rayliant Global Advisors Ltd., called it a “genius move” that could potentially boost Musk’s political power and ultimately help protect his companies.
“We will see some initial volatility,” Hsu added. “Some investors would be concerned with Elon’s distraction and perhaps many don’t yet see this move as the best move to protect Tesla from the wrath of the current Trump administration.”
