Musk Steps Back from Politics, Temporarily Easing Market Concerns, but Faces a Sudden Policy Blow

TradingKey – On May 20 (ET), during the Qatar Economic Forum, Elon Musk stated that he would remain CEO of Tesla for the next five years and significantly reduce his political spending. This move helped ease some investor concerns about his ability to stay focused on running Tesla.

However, the U.S. Senate’s vote to block the repeal of California's ban on gasoline-powered car sales has sparked new concerns in the market. The bill is now being submitted for former President Donald Trump’s approval.

Previously, Musk was one of the largest financial backers of Trump's 2024 presidential campaign, reportedly donating at least $250 million to a pro-Trump super PAC.
Musk also served as the head of the “Office of Federal Efficiency” under the Trump administration, a role aimed at cutting federal spending and reducing staff. However, this department was widely criticized for its aggressive measures and controversial policies.

If Trump agrees to sign off on the repeal of the gasoline car sales ban, Tesla’s stock may face short-term volatility. The move would likely benefit traditional automakers and oil companies. While public sentiment might view this as Trump turning his back on Musk, in reality, Musk has consistently advocated for a free market and emphasized that markets should not be excessively influenced by policy.

Tesla's Current Challenges

Musk’s political involvement has stirred significant controversy, leading to repeated attacks on Tesla vehicles and stores. Tesla’s stock has been heavily sold off, with rating downgrades from institutions and the share price nearly halved year-to-date, hitting a new low in April.

[Tesla Stock Price – 1-Hour Chart, Source: Mitrade]

Tesla faces intensified market competition, with its market share challenged by automakers like BYD and Chevrolet. With public concern over Tesla’s potential entanglement in political developments, the company’s sales are under considerable short-term pressure.

According to Tesla's fiscal Q1 2025 financial report, the company generated $19.335 billion in total revenue for the quarter, down 9% from $21.301 billion a year earlier. Net profit dropped significantly to $420 million from $1.405 billion in the same period last year.

Tesla's U.S. sales showed a quarter-over-quarter decline, signaling a serious warning for the company.

[Quarter-over-Quarter EV Sales by Brand in the U.S., Q1, Source: Cox Automotive]

Upcoming Key Issues to Watch:

Whether Trump’s decision on the bill will continue to put pressure on Tesla’s stock price.

Whether Tesla’s Q2 earnings can benefit from tariff adjustments to gain momentum in overseas markets.