Tesla shares fell nearly 8% on Monday, shaken by Elon Musk's announcement of the creation of a new US political party called the "America Party." This controversial initiative, launched after a public standoff with President Donald Trump, is fueling doubts about the billionaire's commitment to his company, which is already weakened by a steady decline in sales.

Best friends... but not forever

The businessman, who became the richest man in the world thanks to his companies Tesla and SpaceX, spent hundreds of millions of dollars on Donald Trump's re-election campaign and was appointed to his administration earlier this year to head the new Department of Government Efficiency, tasked with "cutting" federal spending.

But the once idyllic relationship between Donald Trump and Elon Musk turned sour when Musk threatened in early June to fund campaigns against Republican Congress members who would approve the US president's sweeping budget plan, which he called a "repugnant abomination."

This was followed by a heated exchange, during which the Tesla boss notably supported the impeachment of the US president. Donald Trump had already threatened to cut federal funding for Musk's companies.

After a few weeks of calm, the clash resumed with a vengeance last week. A few days before the tax bill was voted on, Elon Musk once again criticized the plan. In response, Donald Trump suggested that DOGE investigate the subsidies received by Musk's companies. "Maybe we should put DOGE on Elon (...) DOGE is the monster that could in turn eat Elon. Wouldn't that be great?"

In response, Elon Musk renewed his call for the creation of a new political party, arguing that "we live in a one-party country – the PIGGIE PARTY!!".

No threesome

At the weekend, Elon Musk made good on his threat: "Today, the America First Party is founded to give you back your freedom," the billionaire said in a post on his social network X, one day after asking his followers if a new American political party should be created.

It was an idea that Donald Trump immediately attacked. "I think it's ridiculous to want to create a third party," Donald Trump told reporters on Sunday before boarding Air Force One in Morristown, New Jersey. "Starting a third party just adds to the confusion... He can play with that idea, but in my opinion, it's ridiculous."

In American politics, the idea of creating a third party to compete with the Republican/Democrat duopoly is a recurring theme. So far, no one has succeeded in establishing a genuine third political force.

Donald Trump himself tried it with the Reform Party in 2000. At the time, he justified his candidacy with the opposite arguments, but with the same conclusion: "They don't want anyone to come in and take down the Democrats and Republicans, anyone to disrupt the rules they themselves have set up. It's ridiculous." The campaign ultimately ended after four months.

It therefore seems difficult to see the "America's Party" gaining traction. Nevertheless, Elon Musk could have significant disruptive power over the Republicans. With only a few candidates in the November 2026 midterms, he could cause the Republican Party to lose certain districts. A few seats could tip the balance of power in the House or Senate.

The CEO rather than the politician

What is certain is that shareholders did not appreciate this new foray into politics. On Monday on Wall Street, Tesla shares ended the day down 7%.

To fully understand Tesla's recent stockmarket performance, we need to go back a year. Elon Musk pledged his support for Donald Trump in the summer of 2024. This commitment benefited Tesla's stock during the end of the campaign and in the weeks following the election. At the time, investors were betting that Elon Musk's proximity to the president would lead to more favorable regulations to accelerate the rollout of autonomous driving, one of the main drivers of Tesla's narrative.

But little by little, Elon Musk's political involvement and controversial statements damaged the brand's image, particularly in Europe, where sales collapsed. As a result, the stock price plummeted. Since peaking in mid-December, Tesla has lost about a third of its value.

The current situation is perfectly summed up by Wedbush analyst Dan Ives: "The fact that Musk is becoming more involved in politics... is exactly the opposite direction Tesla investors and shareholders want him to take." Faced with the company's difficulties, investors would like the CEO to focus fully on turning it around rather than "spreading himself too thin" in politics.

This is especially true given that the brand is also struggling in China, where it faces stiff competition. And the rift with Donald Trump could further weaken its position in the country. However, as reported by the Wall Street Journal on Monday, the break between Elon Musk and Donald Trump limits Elon Musk's "value" in the eyes of the Chinese government.

In short, his proximity to the president made him a strategic asset for the Chinese authorities. In January, during a visit to Washington, Chinese Vice President Han Zheng reportedly told Musk that Beijing hoped he would play a "constructive role" in Sino-US relations. Now, the Tesla boss can clearly no longer play the go-between.

Elon Musk's political engagement has therefore come at a serious cost to Tesla's ambitions. A few months ago, he proudly held up a chainsaw in the air to illustrate his desire to reduce public spending, following the example of Argentine President Javier Milei. However, the only significant cut he ultimately made was to Tesla's market capitalization.

Drawing by Amandine Victor