Musk Announces New "American Party" — Tesla Shares Tumble Over 7% Amid Valuation Fears

TradingKey – On July 5, 2025 (U.S. Eastern Time), Elon Musk announced the formation of a new political party — the “American Party” — on social media platform X, triggering a sharp market reaction. Tesla’s after-hours trading saw shares fall over 7% , wiping out more than $70 billion in market value and showing no sign of stabilizing by the time of writing.

The move came as a response to a recent online poll initiated by Musk on July 4, which drew participation from 1.249 million voters, with 65.4% voting in favor of creating a centrist third party to challenge the dominance of Democrats and Republicans. Musk argued that the U.S. is nearing financial collapse due to waste and corruption, and called for urgent political reform.

However, this high-profile political move has raised concerns among investors who worry about its impact on Tesla’s brand and financial outlook. The company has long relied on government subsidies and carbon credit revenue, and the recently passed “Big Beautiful” bill — which eliminates electric vehicle tax credits — is expected to cut Tesla’s annual profits by around $3.2 billion , according to analysts.

Investors are also concerned about brand damage. According to data from Stifel, consumer sentiment toward Tesla has fallen sharply — net positive perception dropped from 9% in January 2024 to just 3%. In Europe, sales declined 52.6% year-on-year, with some buyers explicitly stating they’ve avoided Tesla due to Musk’s public stance.

From a fundamental standpoint, Tesla reported Q2 2025 deliveries at 384,100 units, down 13.5% year-over-year. The company is now counting on Full Self-Driving (FSD) and Robotaxi to reinvigorate its growth narrative. But commercialization timelines remain uncertain.

Analysts across Wall Street have pointed to growing risks from Musk’s political involvement:

• James Fishback, an analyst at Azoria Partners, said Saturday that the firm will delay its Tesla ETF launch, citing Musk’s announcement as a source of weakened investor confidence.

• Ryan Brinkman of JPMorgan Chase warned that Musk’s political moves are adding dual pressure on brand and valuation, urging investors to prepare for heightened short-term volatility.

Adam Jonas of Morgan Stanley acknowledged that Tesla’s autonomous driving strategy remains key to its long-term potential, but noted that current political risk could slow valuation recovery.