Tesla Down 20%—The Real Reason Isn’t the Trump Fight
Once a close ally, Elon Musk has gone from cheerleader to enemy of Donald Trump in less than a week.
Tesla stock has plunged nearly 20% over the past few trading days.
Most people think it’s due to the highly publicized fallout between the two billionaires. But I believe it runs deeper than that. There’s real, tangible policy risk that investors are now pricing in—particularly from Trump’s proposed tax bill, which could directly impact both Tesla’s bottom line and SpaceX’s government cash flow.
Let’s unpack what’s really going on.
The Timeline Doesn’t Add Up—Until the Bill Drops
The Musk–Trump feud began brewing last week. Musk publicly criticized Trump’s "Big Beautiful Tax Bill," calling it a disaster. In response, Trump retaliated—pulling Jared Isaacman (a Musk ally and commander of a SpaceX mission) as a nominee for NASA administrator.
But interestingly, Tesla shares didn’t plunge immediately. And the Destiny Tech100 ETF (DXYZ), which holds a 38% stake in SpaceX, also held up—until June 5, when it suddenly crashed 13% in a day.
So what changed?
That was the day where the public knew more details of the tax bill. It wasn’t just a political spat anymore—it was about money. And markets finally took notice.
Tesla’s Real Risk: EV Subsidy Cuts
One of the biggest blows in the bill is the proposed repeal of the US$7,500 EV subsidy. This directly affects the affordability of some of Tesla’s most popular models.
JPMorgan estimates that this could cut Tesla’s profits by US$1.2 billion a year. That’s about 17% of Tesla’s 2024 earnings, which came in at US$7 billion. And that’s not including the loss of other tax incentives for EV charging infrastructure and regulatory credits that Tesla has historically relied on to boost margins.
Tesla’s profitability has already been under pressure from intensifying competition and price cuts. Removing this layer of government support could push Tesla’s margins even lower, especially in the U.S. where much of its brand strength lies.
SpaceX: Private Revenue Is Rising, But It’s Still Politically Exposed
It’s true that more than half of SpaceX’s revenue now comes from Starlink, its privately-run satellite internet service. But don’t be fooled—government contracts still make up a significant portion of its cash flow.
Rough estimates for 2024 break down like this:
58%: Starlink (private)
32%: Launch & Dragon missions (roughly 40% from NASA/DoD)
10%: Other services, including defense-linked Starshield
That means US$3–4 billion of SpaceX’s expected revenue still hinges on NASA and Pentagon funding. Trump’s bill includes a 24% cut to NASA’s budget, which could delay or reduce milestone payments for the Artemis program—where SpaceX is a key contractor.
While SpaceX might survive this financially thanks to Starlink, its R&D pace, launch frequency, and big-ticket projects like Starship could slow down without that federal fuel.
It’s All About Business
Contrary to public perception, I think the sequence is reversed. It’s not the feud that triggered the bill. It’s the bill that triggered the feud.
Musk likely felt betrayed. He had backed Trump in various ways, including rumored campaign financing and reportedly serving as an informal advisor on tech and energy policy. Unlike traditional corporate lobbying via think tanks or PACs, Musk plays the game differently—he inserts himself directly into the political inner circle. His support isn’t just ideological; it’s strategic. You could argue that his political donations are more like investments into regulatory goodwill for Tesla and SpaceX.
That’s why the “Big Beautiful Bill” felt like a betrayal. It didn’t just remove subsidies—it pulled the rug out from a carefully cultivated relationship. The bill cut straight into Tesla’s profit drivers and threatened to delay SpaceX’s government cash flows. When Musk realized he wasn’t getting the return on his political capital, he lashed out. The fallout followed.
Can They Patch It Up?
It’s still possible that Musk and Trump strike a deal. Trump is transactional. If there's value in keeping Musk close—especially for a Space Race narrative—he might amend the bill or soften its impact. A revised EV credit or reinstated NASA funding could follow.
But if the rift continues and the bill goes through, Tesla will feel the pain much more than SpaceX. Tesla’s profitability is far more sensitive to U.S. consumer policy, while SpaceX at least has a growing private business.
So Tesla investors should brace for a tougher road ahead in a world without subsidies. At the very least, Musk may now refocus on his core businesses—after his stint in D.O.G.E. has ended.