Tesla shares rebounded 2% in early trading on Tuesday, recovering some ground after a sharp sell-off the previous day sparked by CEO Elon Musk’s announcement of a new political party.
The partial recovery came amid a broader market calm, offering investors a brief respite from Monday’s plunge.
Musk’s weekend reveal of the “America Party” — aimed at influencing select Congressional races — raised fresh concerns about political distractions and their potential impact on Tesla’s leadership focus.
The Tesla stock has had a rollercoaster ride on the bourses this year. In the past six months, the stock has slipped by over 23%.
Elon Musk is battling more than political controversy. Tesla reported a 14% year-on-year drop in vehicle deliveries for the second quarter.
The shortfall adds to growing concerns about the company’s momentum.
Tesla is facing stiff competition, particularly in China, where local rivals are gaining ground and pricing pressure is intensifying.
As deliveries fall and market share slips, investors seem to be getting increasingly uneasy about Musk’s divided focus between politics and Tesla’s core business.
Analysts warn Musk’s political ambitions could add pressure to Tesla stock
Tesla CEO Elon Musk’s deepening involvement in US politics is drawing sharp concern from Wall Street analysts, who warn it could further strain investor sentiment and weigh on Tesla’s stock performance.
In a research note, Morgan Stanley’s Adam Jonas said investors should brace for “further devotion of resources—financial, time, and attention—in the direction of Mr Musk’s political priorities,” suggesting this shift may apply additional short-term pressure on Tesla shares.
Dan Ives of Wedbush Securities was more pointed, writing that Musk’s decision to intensify his political activism—most recently with the launch of the America Party—is “exactly the opposite direction that Tesla investors/shareholders want him to take during this crucial period for the Tesla story.”
While Musk still commands loyalty from a segment of Tesla’s shareholder base, Ives said “there is a broader sense of exhaustion” among other investors over his political focus.
Ives called for urgent action from Tesla’s board, including the establishment of firm governance around Musk’s time allocation and political involvement.
Tesla Board of Directions…take the following 3 steps in our view
1. New pay package getting Musk to 25% voting control. Clears a path for xAI merger.
2. Guardrails established for amount of time Musk spends at Tesla as part of pay package
3. Oversight on political endeavors 🎯
In a note to clients on Tuesday, he proposed a new compensation structure that would double Musk’s voting rights to 25% but include enforceable conditions, such as minimum time commitments to Tesla.
He also suggested forming a board-level oversight committee to monitor Musk’s political actions.
This, he said, would ensure they don’t interfere with his leadership duties at Tesla.
“The board needs to act now,” Ives wrote, underscoring growing investor calls for a clearer separation between Musk’s political agenda and his responsibilities as Tesla’s CEO.
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