Musk's New Political Gambit Weighs on Tesla

Another foray into politics by its eccentric CEO has left Tesla stockholders bruised as investors wonder what's next for the company after the much-awaited robotaxi launch.

Tesla Loses $54 Billion in Market Cap

Some investors were relieved last month after Tesla CEO Elon Musk stepped down from his controversial role in the government. The company had lost nearly $250 billion in market capitalisation. To investors’ surprise, in the US last Friday. Tesla stock was down 7% before the open, erasing another $54 billion from the company's market capitalisation. The company's share price has now decreased by over 20% for the year, despite its much-anticipated robotaxis having a limited debut, which had helped return the stock to the green.

In less than a year, Musk has managed to antagonise supporters of the political left by supporting Trump's campaign, only to repeat the process to Trump supporters by opposing the spending bill. This leaves a relatively small segment of the market indifferent to Musk's antics. 52% of Americans say they are t if the company takes a political stance with which they disagree. A larger component, 63%, believes that companies should stay out of politics. Meanwhile, in Europe despite overall EV sales rising. The only bright spot is China, where sales are up 0.8% over the last month.

Musk Is Unable to Detach from Politics

Part of Tesla's woes, at least internationally, can be attributed to the influx of cheaper Chinese-made EVs, which is stiffening competition. But investors are most worried about . Though it should be noted that Musk's political proposals are relatively modest, his "America Party" is designed to provide challenges to just a few key Congressional seats, and at least for now, isn't intended to compete in national elections. However, it will still be a distraction for the CEO, who must contend with a 14% drop in deliveries in the second quarter as well as rising competition.

As Tesla seeks to iron out some kinks discovered in its first public trial of robotaxis, it will likely face regulatory hurdles. While starting a third political party might irritate politicians and the current administration, some Tesla supporters have several positives they can point to. Well-known backers, such as Cathie Wood, argue that the company's value lies in robotaxis, not car sales. Others believe that Tesla's humanoid robot, Optimus, has significant growth potential, particularly in home services, with some analysts estimating a market of up to $24 trillion. Musk himself said he expected the company to produce 1 million of its Optimus units by the end of the decade. But whether any of these technologies turn a profit depends on whether the CEO can still keep his eye on the ball.

TSLA Price Action Tightens

After failing to break through the $350 trendline resistance in late June, which coincides with the 50% Fibonacci, Tesla may be heading towards a double-bottom support at $270. As the long-term price action suggests a tightening consolidation, the opposing ‘autotrend’ trendline could offer support near $250 (currently at $235). However,  a break above the $300 level and the ‘autotrend’ trendline could open the door to $370 and the $400 handle, while further declines may expose $215 and $200.

Source: SpreadEx | TESLA

Key Takeaways

Musk's foray into politics has dealt a blow to TSLA, erasing $54 billion from its market cap, with the stock down 20% for the year. Investors are concerned about Musk's inability to detach from politics. His involvement remains a distraction at a time when the company faces a drop in deliveries and rising competition from cheaper Chinese EVs. Yet, some supporters remain optimistic about the potential of robotaxis and Optimus. However, the long-term profitability of these technologies might still depend on Musk’s ability to focus on Tesla.