Tesla Inc. (TSLA) experienced a dramatic sell-off on June 5, 2025, with shares plummeting by more than 17% in one trading session. The drop marked one of the sharpest single-day losses for the electric vehicle giant in recent years and sent shockwaves through Wall Street, shaking investor confidence and impacting broader tech markets.
What Triggered the Sell-Off?
At the center of the storm is an escalating political feud between Tesla CEO Elon Musk and former U.S. President Donald Trump. Tensions came to a head after Trump openly criticized Musk for withdrawing support from his presidential campaign and accused him of leveraging federal subsidies to build his business empire.
In a series of social media posts and public statements, Trump threatened to revoke key electric vehicle (EV) incentives, including the federal EV tax credit of up to $7,500 per car. This potential rollback raised alarms among investors, who worry that losing these subsidies could significantly impact Tesla’s competitive edge and profitability in the U.S. market.
Musk, in turn, criticized Trump’s policy agenda and accused him of using government tools for personal retaliation. The billionaire’s comments, though applauded by some, further fueled political uncertainty around Tesla’s future.
Wall Street Reacts: A Massive Drop in Market Value
Tesla’s stock opened the day around $332 but rapidly declined as the trading session progressed, closing below $274. The wipeout erased roughly $150 billion in market capitalization in just a matter of hours. Analysts noted that the sharp downturn was compounded by several factors:
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Institutional Profit-Taking: After a 45% run-up in Tesla’s stock since April, many large investors may have seen this political disruption as a signal to lock in profits.
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Technical Breakdown: The stock breached multiple technical support levels, including the 21-day, 50-day, and 200-day moving averages—indicators closely followed by traders. This triggered further sell orders and algorithmic trading activity that accelerated the decline.
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Sector-Wide Impact: Tesla is a major component of key ETFs and indices like the S&P 500 and Nasdaq. As a result, the stock’s plunge dragged down broader markets. Tech stocks in particular suffered collateral damage, even as positive developments in U.S.–China trade talks had helped fuel earlier optimism.
Other Warning Signs Adding Pressure
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Global Sales Slowing
New data out of Europe and Asia added to the negative sentiment. In Germany, Tesla’s vehicle registrations dropped 36% year-over-year in May. Meanwhile, in China—one of Tesla’s most critical markets—deliveries also fell sharply, stoking fears of weakening international demand. -
Government Support at Risk
With Trump publicly attacking Musk and threatening to eliminate Tesla’s access to government contracts and tax incentives, analysts say political risk is now a serious concern for the company. Tesla’s long-term projects—such as its self-driving “robotaxi” fleet planned for rollout in Austin—could be in jeopardy if federal cooperation deteriorates. -
Investor Sentiment Turning Cautious
The growing uncertainty around U.S. regulatory support for EVs, combined with Tesla’s exposure to political tensions, is prompting analysts to revise their short-term outlook. Some now believe Tesla stock may test support levels as low as $265 in the coming sessions.
What’s Next for Tesla and Investors?
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Political Tensions Must Be Watched: The Musk–Trump conflict could have lasting implications if it leads to changes in U.S. EV policy.
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Market Volatility Ahead: With Tesla serving as a bellwether for clean energy and innovation sectors, any continued volatility will likely ripple through related industries.
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Long-Term Growth Still Intact? Some analysts remain cautiously optimistic, pointing to Tesla’s innovations in AI, robotics, and battery technology. However, they stress that the company’s dependence on federal support and regulatory frameworks may become a vulnerability in politically charged times.
Conclusion:
Tesla’s sharp decline underscores how fragile investor confidence can be in the face of political uncertainty. As one of the world’s most influential tech companies, Tesla now finds itself navigating not only market dynamics and global competition but also a growing war of words between its outspoken CEO and a former U.S. president with significant influence.
Investors are watching closely to see whether this rift will escalate—or if Tesla can recover and refocus on its technological mission.
