Musk Announces New "American Party" — Tesla Shares Tumble Over 7% Amid Valuation Fears

TradingKey — In a surprise move that sent shockwaves through financial markets, Tesla CEO Elon Musk announced the formation of a new political party—dubbed the “American Party”—on his social media platform X, shortly after midnight Eastern Time on July 5, 2025. The announcement triggered a sharp sell-off in Tesla shares, with the stock tumbling more than 7% in  night session, wiping out over $70 billion in market value.

[Tesla After-Hours Price | Source: Investing.com]

As of press time, Tesla’s night session trading showed no sign of recovery, reflecting growing investor anxiety over Musk's deepening involvement in U.S. politics.

In response to Musk’s announcement, James Fishback, an analyst at U.S. investment firm Azoria Partners, said Saturday that the firm would delay the launch of its Tesla-focused ETF. He cited concerns that Musk’s political ambitions have begun to erode shareholder confidence in the automaker’s long-term stability.

Musk’s decision to create a new political entity came just hours after he referenced a recent online poll held on July 4, which drew 1.249 million participants. Of those, 65.4% voted in favor of breaking the current two-party system and forming a new centrist party. Musk framed the move as necessary to rescue the United States from what he described as impending collapse due to "waste and corruption," calling for urgent political reform.

However, investors reacted swiftly with skepticism. Tesla has increasingly relied on government subsidies and carbon credit sales in recent years. Analysts warn that the recently passed “Make America Great Again” bill—which eliminated tax credits for electric vehicles—could cost Tesla up to $3.2 billion annually.

Even more concerning is the potential damage to Tesla’s brand image. According to Stifel data, consumer sentiment toward Tesla has deteriorated sharply, falling from a net positive rating of 9% in January 2024 to just 3% by mid-2025. In Europe, quarterly deliveries dropped 52.6% year-over-year, with some customers explicitly stating they are boycotting the brand due to Musk’s political stances.

From a fundamental perspective, Tesla reported Q2 2025 vehicle deliveries of 384,100 units—down 13.5% year-on-year. The company is now banking heavily on the commercialization of its Full Self-Driving (FSD) software and upcoming Robotaxi project to reignite growth, though both remain shrouded in uncertainty.

Analysts widely agree that Musk’s political maneuvers are amplifying Tesla’s valuation volatility. Ryan Brinkman, an analyst at JPMorgan Chase, warned that Musk’s political gambles pose dual risks to Tesla’s brand reputation and financial performance, urging investors to brace for heightened short-term turbulence.

Adam Jonas, Morgan Stanley’s lead automotive analyst, echoed similar concerns, noting that while Tesla’s autonomous driving strategy remains key to its long-term success, near-term political distractions could hinder any meaningful recovery in its stock valuation.

Bottom Line: As Musk dives deeper into the political arena, Tesla investors are left questioning whether the visionary entrepreneur can continue to drive innovation without derailing the company’s already fragile momentum.

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