Today, Tesla’s stock plummeted 16% as a public feud between CEO Elon Musk and President Donald Trump intensified, threatening federal subsidies critical to the electric vehicle (EV) maker’s growth. The clash, fueled by Musk’s provocative claim about Trump’s ties to Jeffrey Epstein and his call for the president’s impeachment, has rattled investors and raised questions about Tesla‘s financial stability.

Trump’s Subsidy Threats Shake Tesla’s Market Position

The conflict erupted when Trump, speaking from the Oval Office, expressed disappointment in Musk and threatened to eliminate federal contracts and subsidies for Musk’s companies, including Tesla. “The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts,” Trump stated on Truth Social.

This follows the House of Representatives’ budget bill proposing to end the $7,500 EV tax credit by December 2025, a move that could slash Tesla’s sales, as the company delivered over 336,000 vehicles in Q1 2025 alone.

The subsidy cut would hit Tesla hard, with analysts estimating it could reduce 2025 profits by over 50%. “The budget bill contains bad stuff for Tesla with the end of the EV credits,” said Jed Ellerbroek, portfolio manager at Argent Capital Management. Tesla’s stock, already down 25% this year, lost approximately $267 billion in market value since Musk’s departure from his government role last month.

Musk’s Tariff Warning Signals Broader EV Industry Risks

Musk countered Trump’s threats by warning that the president’s tariff policies could trigger economic fallout. “The Trump tariffs will cause a recession in the second half of this year,” Musk wrote on X, echoing his past criticism of tariffs that increased costs for Tesla’s China-sourced components. These tariffs, combined with subsidy cuts, could raise EV prices, potentially curbing demand in a U.S. market where Tesla faces growing competition from rivals like BYD and Waymo.

Tesla’s challenges extend beyond policy. Declining sales in Europa and a weakened U.S. brand have strained fundamentals. The company’s long-delayed robotaxi pilot in Austin, set for June 12, lags behind Waymo’s 250,000 weekly autonomous rides, adding pressure to Tesla’s autonomous driving ambitions.

Operational and Economic Implications for EV Owners

For Tesla owners and EV enthusiasts, the subsidy rollback could increase vehicle costs. A Tesla Modelo Y, currently priced around $44,990 after credits, could see effective prices rise by $7,500, potentially deterring budget-conscious buyers. Meanwhile, Musk’s focus on autonomy, with Tesla betting heavily on Conducción autónoma total (FSD) technology, faces scrutiny. Federal regulators are investigating FSD’s safety after crashes, which could delay robotaxi deployment and impact Tesla’s valuation, pegged partly on autonomous revenue.

What’s Next for Tesla and the EV Sector?

The Musk-Trump feud underscores the EV industry’s vulnerability to political shifts. As Tesla navigates subsidy losses and tariff-driven cost hikes, competitors with diversified production, like BYD, may gain ground. For EV owners, the immediate concern is affordability, while long-term questions linger about Tesla’s ability to deliver on autonomy promises amid regulatory and competitive pressures. Musk’s bold political moves may galvanize his base but risk alienating investors, with Tesla’s stock volatility reflecting the high stakes.