LDN - Business

Trump's efforts to help Tesla could hurt it instead

[March 12, 2025] By BERNARD CONDON

Donald Trump's support for Elon Musk's car company could end up hurting it.

Tesla investors cheered Tuesday as Trump came to the defense of Musk's beleaguered and boycotted carmaker by lavishing the Tesla CEO with praise in a press conference as five Teslas lined up in the White House driveway. Trump called Musk a “patriot” and announced that he had even bought one of his cars — a show of support that may have helped Tesla stock close higher for the day after a plunge a day earlier.

But experts warn the unusual presidential backing of a private company could backfire.

“Tesla is becoming a political symbol of Trump and DOGE, and that is a bad thing for the brand,” said Wedbush Securities financial analyst Dan Ives, referring to the advisory group in charge of cutting government spending led by Musk. “You think it’s helping, but it’s actually hurting.”

Tesla's stock began rising from the opening Tuesday after Trump posted overnight on his Truth Social platform that Musk was “putting it on the line” to help the country. Trump claimed in the post that “Radical Left Lunatics” were attempting to “illegally and collusively boycott Tesla, one of the World’s great automakers, and Elon’s ’baby.'”

A few hours later, Tesla stock surged even higher as Trump announced at the White House that he had bought a Tesla himself.

“I don’t like what’s happening to you,” said Trump, before picking a red Model S, which retails for $80,000. As he eased into the driver seat, he exclaimed, "Wow. That’s beautiful.”

The stock ended up closing up nearly 4% on Tuesday after one of the worst single day sell-offs in Tesla’s history a day earlier.

Tesla has been pummeled this year under competition from rival electric vehicles, particularly out of China. Numerous auto industry analysts have also pointed to Musk's close association with Trump and with far right causes globally. Tesla showrooms in the U.S. have been besieged by protesters and its vehicles vandalized on the street. Tesla owners, perhaps in a bid to avoid being targeted, have placed bumper stickers on their cars with messages like, “I bought it before Elon went nuts.”

Shares have plummeted 45% in 2025 and on Monday tumbled more than 15% to $222.15, the lowest since late October, reflecting newfound pessimism as sales crater around the globe.

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A banner is left outside a Tesla showroom during a demonstration, in Lisbon, Sunday, March 9, 2025. (AP Photo/Armando Franca)

Musk pumped $270 million into Trump's campaign heading into the 2024 election, appeared on stage with him and cheered Trump's victory over Democratic candidate Kamala Harris in November. Tesla shares soared to $479 per share by mid-December, but are now trading around $230 per share.

That drop could hurt the company in the coming year in two ways.

First, Tesla offers many of its workers the chance to buy shares at a discounted price as a way of incentivizing them. But with the stock down sharply, this discounted price offered last year is in many cases higher than the stock is currently trading, meaning there is no discount at all and the incentive is worthless.

Second, the price drop could limit Tesla’s ability to raise money by selling newly created shares to investors to fund research and expansion. In 2020, the company sold $12 billion worth of shares as it was building factories in Berlin and Texas and pouring money into self-driving technology. A falling stock price means it will get far less in proceeds in any future so-called secondary offerings, though slumping sales means it may not need to expand soon.

Musk has become the face of the Trump administration's slash-and-burn government downsizing efforts, known as the Department of Government Efficiency, or DOGE. The department has promised massive federal worker layoffs and aims to drastically reduce government spending. Musk's involvement has raised a familiar issue for Tesla shareholders: That the CEO, who also runs several other companies, is too distracted to fully focus on his EV company.

Some of those other companies have also run into trouble recently. His X social media platform crashed several times on Monday, which Musk claimed was a “massive" cyberattack. But like the clear-cutting he's done with federal jobs, Musk slashed the number of employees at X and technology experts warned of increased vulnerability.

Last week, a rocket launched by Musk's SpaceX exploded and broke apart over Florida, about two months after another of the company's rockets failed.

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