
Shares of Tesla (TSLA) fell on Tuesday after CEO Elon Musk renewed his calls to cut wasteful government spending, including subsidies for electric vehicles.
Responding to a post by President Trump on Truth Social about the Department of Government Efficiency (DOGE) investigating Musk’s EV subsidies, Musk wrote, “I am literally saying cut it all. Now.”
Musk has been an outspoken critic of President Trump’s “Big, Beautiful Bill,” a sweeping package of tax cuts and spending programs that economists warn could add trillions of dollars to the federal deficit over the next decade.
In turn, Trump has threatened to revoke government subsidies for Musk’s companies, including Tesla.
Musk “may get more subsidy than any human being in history, by far,” Trump wrote. Without government handouts, “Elon would probably have to close up shop,” he continued.
However, Musk’s remarks suggest he’s ready to operate in a world without EV mandates or government support - a transition that could prove challenging for Tesla in the short term.
The company still depends heavily on government carbon credits for profitability. Data from CarbonCredits.com shows these credits accounted for between 10% and 30% of Tesla’s net income in recent years, hitting the higher end of that range in 2024.
Tesla stock slides on the news
Tesla investors know that the government’s EV mandate has been a major boon for TSLA stock. As tensions escalated this week, Tesla shares fell as much as 7.7% on Tuesday, according to Bloomberg data.
On Tuesday, TSLA shares closed down 5.3% at $300.71. The stock has a total market capitalization of $952 billion.
Unlike the broader market, Tesla stock has struggled to recover in recent months. Shares are still down 11.6% over the past month and more than 20% year-to-date.
By comparison, the S&P 500 Index has climbed back to record highs, rising 4.4% over the past month and 5.6% so far this year. The tech-heavy Nasdaq Composite Index is up 5.3% for the month and 5% year-to-date.
Tesla’s underperformance partly reflects the lingering impact of its weak first-quarter earnings report, which showed net income plunging 71% and automotive revenue dropping 20%. Companywide revenues came in at $19.34 billion, significantly below the $21.11 billion expected.
Ironically, some of Tesla’s recent struggles stem from consumer backlash over Musk’s ties to the Trump White House - a relationship from which he is now distancing himself.
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