Tesla Shares Drop 7% After Elon Musk Announces Plans for New Political Party

What Happened?

On Monday shares of Tesla were down 7% following the announcement by Elon Musk that he plans to form a new political party called the America party. Mr. Musk said the new party would focus on two or three Senate seats and between eight and ten U.S. House of Representative districts. Claiming those would be ‘enough to serve as the deciding vote on contentious laws, ensuring that they serve the true will of the people.’

President Trump responded to the announcement by saying Mr. Musk had ‘gone completely off the rails.’

Why it Matters

Tesla’s investors have made clear they want Mr. Musk to stay out of politics, and indeed after he left the Department of Government Efficiency (DOGE) Tesla’s share prices rebounded. Dan Ives, head of Wedbush Securities, wrote on Sunday, ‘While the core Musk supporters will back Musk at every turn no matter what, there is broader sense of exhaustion from many Tesla investors that Musk keeps heading down the political track.’

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Rather than withdrawing from politics, Mr. Musk appears to be doubling down with his latest announcement. While the initial move to DOGE brought a brief bump to Tesla’s value, after the public falling out between President Trump and Mr. Musk, Tesla’s shares took another hit. Tesla just reported a 14% decline in car orders for the second quarter, signaling that the tech company’s woes may not be over yet.

The focus area behind the America party is an interesting one. President Trump’s budget bill passed by very narrow margins, a single vote in the U.S. Senate and only four votes in the House of Representatives. That continues a trend of close budget votes for both Democratic and Republican administrations. If a third political party emerged that could control even a handful of swing votes, they could gain enormous leverage over the outcome of national policy debates and legislation. 

Elon Musk has continued to attack the recently passed federal budget as ‘an abomination,’ continuing to deepen his ongoing feud with U.S. President Donald Trump. The Congressional Budget Office estimates the new bill will add nearly $4 trillion to the national debt. While Republican leaders in the House have said those numbers are wrong because they think the new tax cuts should not be counted. 

As for what the new America party would be all about, Mr. Musk thus far has said only that it would be ‘pro-second amendment and pro-Bitcoin.’

How it Affects You

For most of its history the U.S. has been dominated by two political parties, and even though today a sizeable number of Americans support a third party, no such party has materialized. One problem is a lack of resources, which someone whose pockets are as deep as Elon Musk’s could solve.