By Faith Barbara N Ruhinda Updated at 1547 EAT on Tuesday 8 July 2025

Tesla’s troubles go far beyond CEO Elon Musk’s latest spat with former President Donald Trump, who accused his onetime ally of going “completely ‘off the rails’” in a social media clash over the weekend.

While the Musk–Trump feud is grabbing headlines, the more serious story lies beneath the surface: Tesla’s financial outlook has taken a sharp turn for the worse. Revenue growth is slowing, margins are tightening, and the company may even be sliding back into the red — issues that have nothing to do with Musk’s politics and everything to do with deeper structural problems.

Musk was Trump’s biggest financial backer during the 2024 campaign and a regular presence at both Mar-a-Lago and the White House early in Trump’s second term, playing a key role in the controversial downsizing of the federal workforce through the Department of Government Efficiency (DOGE).

But the alliance began to unravel last week, when Musk announced the launch of a new political party in protest of Trump’s newly signed tax and spending bill. Since then, the public jabs between the two on their respective platforms have only escalated.

Tesla shares fell 6.8% on Monday, as investors reacted to concerns over CEO Elon Musk’s deepening political entanglements despite his assurances that he’s re-committed to focusing on the company.

“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,” wrote Dan Ives, a longtime Tesla bull and analyst at Wedbush Securities.

In a follow-up note on Tuesday, Ives urged Tesla’s board to establish clear boundaries around Musk’s political involvement, warning that the company is at a “tipping point” in its trajectory.

“Tesla is heading into one of the most important stages of its growth cycle, with the autonomous and robotics future now on the doorstep,” Ives wrote. “It cannot afford to have Musk devoting more and more time to building a political party an endeavor that will demand immense time, energy, and political capital.”

Still, Ives maintained his “Outperform” rating on Tesla and kept his $500 price target, signaling continued long-term confidence despite near-term turbulence. However, not all analysts were as optimistic. William Blair downgraded the stock to “Market Perform,” citing growing concerns over leadership distractions and operational headwinds.

The firm also lowered its earnings forecast, pointing to a more challenging financial outlook ahead.

Even without the cloud of political controversy, Tesla’s financial outlook has taken a clear turn for the worse.

The company did not respond to multiple requests for comment.

Global sales of Tesla vehicles fell a record 13% in each of the first two quarters of the year compared to the same periods in 2024 a sharp drop even as overall demand for electric vehicles continues to rise. It’s a clear signal that Tesla is losing ground in a market it once dominated.

A major factor behind the company’s shrinking market share is rising competition.

Western automakers have accelerated the rollout of their own EV lineups, while Chinese manufacturers have aggressively expanded, both at home and abroad. BYD, China’s largest EV maker, is on track to surpass Tesla in global EV sales for the first time this year despite the fact that BYD vehicles aren’t even sold in the U.S. Tesla remains a significant player in the Chinese market, but the pressure is mounting.

Further pressure on demand is expected starting October 1, when the current $7,500 federal tax credit for electric vehicle buyers is set to expire. When a previous version of the credit was phased out for Tesla in 2019, the company was forced to slash vehicle prices by roughly half the value of the lost incentive to maintain sales momentum.

But weakening demand isn’t just about policy shifts some of it is self-inflicted. Musk’s increasingly vocal political activity has triggered a consumer backlash, with surveys and anecdotal reports suggesting a measurable impact on Tesla sales. That trend may continue, even as Musk attempts to distance himself from Donald Trump.

Earlier this year, hundreds of protests were staged outside Tesla showrooms across the U.S., Canada, and Europe, many led by former customers or activists concerned about Musk’s political rhetoric.

The growing perception of brand damage helped kick off Tesla’s stock decline and continues to weigh on sentiment.

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