(Bloomberg) -- What began as Elon Musk’s embrace of right-wing populism has become a defining — and potentially harmful — chapter in his business career.
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By endorsing Donald Trump’s MAGA movement and far-right parties in Europe, Musk alienated a big portion of his original customer base, eroding Tesla’s brand, sales and market share around the globe. Then came this week’s rupture: a personal and public breakup with Trump that prompted threats of retaliation from a man with control over the world’s most powerful government.
By simultaneously burning bridges with both his customers and now the political movement he funded and amplified for months, Musk now faces a rare convergence of threats: collapsing brand loyalty, shaky revenues, and mounting legal and regulatory risk.
Tesla Inc.’s sales are already stumbling under the weight of partisan baggage. SpaceX, long seen as a strategic national asset, is facing new scrutiny as political winds shift. And the green shoots at X — Musk’s $44 billion “free speech” experiment— that were fueled by Musk’s proximity to the White House and the ad dollars that followed, may soon disappear.
“Elon isn’t functioning to the benefit of his shareholders,” said Ross Gerber, the chief executive officer of Tesla shareholder Gerber Kawasaki, which has been reducing its Tesla holdings over the last few years.
Speaking on Bloomberg Television on Thursday while the meltdown was still going on, Gerber said Musk’s behavior is leading to the “dismantling of the Musk empire in real time.”
With enemies on both flanks, Musk finds himself at the center of a storm fueled by consumer revolt and political hostility.
“Nobody on the right is gonna buy a Tesla, nobody on the left is gonna buy a Tesla. Elon is a man without a country,” said Steve Bannon, an outside adviser to Trump who has long been critical of Musk, in an interview.
Bannon says he is “in continual conversations at the most senior levels” of the Trump administration to push them to revoke Musk’s security clearance and use the Defense Production Act to seize SpaceX and Starlink on grounds they’re vital to US national security.
Even if Trump doesn’t take such extreme measures, there is no shortage of retaliatory options for the White House. The president could try to wield the power of agencies like the US Securities and Exchange Commission, the National Highway Traffic Safety Administration and the Federal Aviation Administration to inflict real harm — or even just incessant regulatory morass — onto all of Musk’s businesses and the source of his wealth.
In just one day, the Musk-Trump spat shaved $34 billion from his personal net worth, the second-largest loss ever in the history of the Bloomberg Billionaires Index of the 500 wealthiest people on the planet. The only bigger wealth hit: his own wipeout in November 2021. Tesla lost $153 billion of market value on Thursday, with shares reversing course on Friday after Musk began to simmer down.
Musk has faced deep stretches of pain before. There are flanks of skeptics who have, over the years, called for his impending demise only to be proven wrong by the world’s richest man and his cult following of fans and funders willing to throw ever-growing sums of money at his ambitions.
Most famously, Tesla flirted with bankruptcy only to reverse course and become the biggest electric vehicle seller in the world. Musk’s $44 billion purchase of X was widely panned as the company’s debt languished on banks’ books, only to see those fortunes reversed after Trump’s election.
“Musk has a habit of teetering on the edge of destruction and pulling himself back just in the nick of time,” said Nancy Tengler, whose firm holds 3.5% of its growth portfolio in Tesla stock, in a Friday interview on Bloomberg Television.
Tengler, CEO and chief investment officer of Laffer Tengler Investments, said her firm has been adding Tesla shares in recent months but now has a “full position.”
“He needs to dial down the rhetoric and the drama and get back to the business,” she says, as investors own Tesla stock for growth, not for “the histrionics.”
To pull off a rebound this time around, Musk is going to have to convince people to start buying his electric vehicles at a faster clip and reverse the painful sales slide in the US, Europe and around the world.
He’s also going to have to attract riders to his new robotaxi service in Austin as the company makes a gigantic bet on artificial intelligence, robotics and self-driving cars.
Musk has lobbied lawmakers to help clear a path for driverless vehicles, something Trump initially endorsed. It’s now unclear if the Trump-Musk fallout complicates the regulatory environment for autonomous vehicles and potentially slows the path forward for Tesla’s robotaxi network.
“The disagreement will not help Tesla demand but could potentially (temporarily) alienate multiple sides of the political spectrum,” said Morgan Stanley analyst Adam Jonas in a research note entitled “Well That Escalated Quickly...”
Jonas said emotions are “running high” and that he’s sticking to his long-term $410 price target on Tesla’s share price but is bracing for near-term volatility and is “prepared for the stock to give up more.”
Other tests in the coming weeks may include a $5 billion debt offering of the billionaire’s AI company, xAI Corp., as well as funding rounds for xAI and SpaceX. Musk recently closed a $650 million late-stage raise for his neurotechonlogy company Neuralink from big investors including Sequoia Capital, ARK Investment Management and Founders Fund.
From a legal and regulatory perspective, there’s even more at stake for Musk if the Trump administration turns on the billionaire and claws back contracts like the president threatened on Thursday.
SpaceX, one of the world’s most valuable startups with a market value of $350 billion, has received more than $22 billion in unclassified contracts from the Defense Department and NASA since 2000, according to data from Bloomberg Government. It launches critical national security satellites for the Pentagon and the US is depending on the Musk-led company to develop a spacecraft to put American astronauts on the moon in as little as two years.
Musk’s vow to decommission its all-important Dragon spacecraft, which ferries cargo and people to the International Space Station for the US, sent shock waves throughout the industry. Following through with the threat, which Musk later walked back, would sever a vital part of the US space program.
“It is untenable to have a CEO of a prime defense and aerospace contractor threaten to shut down services the government has contracted with them to perform,” said Lori Garver, a former NASA deputy administrator under former President Barack Obama.
Garver says NASA needs SpaceX, but that SpaceX’s business model also depends, in part, on the US government.
“Elon has already walked back decommissioning Dragon, because they do require now, as a big part of their business plan, government contracts. But they provide a service for those contracts. So it’s a symbiotic relationship,” Garver said.
On a more day-to-day basis, government agencies could try to inflict pain on Musk’s businesses by delaying everything from space launches to satellite service to robotaxi expansion. Investigations into publicly traded Tesla or the finances of his companies could include the SEC, as well as antitrust probes and Federal Trade Commission interest around social media moderation, data use or AI.
So far, Musk and Trump may be trying to at least press pause on the public spectacle.
White House officials say Trump plans to focus his attention on inflation and the economy rather than speak to Musk, and insinuated without evidence that the billionaire was agitating for a call with the president. (In a pair of posts on his social media platform Friday morning, Trump intensified his push for Federal Reserve Chair Jerome Powell to lower rates.)
As for pulling Musk’s government contracts, Trump hasn’t yet pursued any steps to follow through with his threats, one of these people said. He is, however, thinking of getting rid of his Tesla.
--With assistance from Josh Wingrove, Akayla Gardner, Denise Lu, Mathieu Benhamou and Paul Murphy.
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