Tesla Inc. (NASDAQ:TSLA) saw its shares plunge by 14.3% on June 5 following a public spat between CEO Elon Musk and former President Donald Trump. The clash began when Musk criticized Trump’s newly proposed tax-and-spending legislation. Trump responded aggressively, threatening to revoke federal contracts and subsidies for Musk’s ventures. This high-profile feud has amplified uncertainty surrounding the electric vehicle giant, with investor sentiment rapidly shifting. While Tesla stock showed a modest rebound on June 6, analysts believe the worst may not be over.

Ross Gerber Warns of Prolonged Tesla Downtrend

Prominent investor Ross Gerber, known for his early bullish stance on Tesla, is now sounding the alarm. “We’re just getting started with the declines,” he told Yahoo Finance. Gerber warned that Trump’s influence on a broad voter base could significantly harm Tesla’s brand image.

“There are a lot more MAGA supporters out there than Elon supporters,” he added, implying that political backlash could affect consumer behavior and investor confidence.

Gerber also pointed to the potential loss of federal electric vehicle (EV) tax credits as part of Trump’s proposed “One Big Beautiful Bill Act,” which could dent demand even further.

EV Tax Credit Elimination Could Hurt TSLA Demand

The elimination of federal tax credits would directly impact Tesla’s pricing power in an already competitive EV market. Rising interest rates, inflationary pressures, and a maturing U.S. EV market have already softened demand in 2025.

Without the cushion of government subsidies, Tesla may have to lower prices or risk losing market share to competitors like Ford Motor Co. (NYSE:F) and Rivian Automotive Inc. (NASDAQ:RIVN).

Robotaxi Plans Unlikely to Save Tesla Stock

Elon Musk has recently ramped up rhetoric around Tesla’s robotaxi platform, with a major product announcement expected later this year. However, Gerber remains skeptical.

“Elon is still in denial that he has a hardware problem – not a software problem,” he said. He believes that the technical and regulatory hurdles in building a scalable, autonomous ride-hailing service are vastly underestimated by the company.

Even if Tesla unveils a prototype, mass adoption could still be years away, and revenue impact minimal in the near term.

Gerber Cuts Tesla Exposure by 60%

Gerber, who once held over 500,000 Tesla shares, now owns approximately 235,000 – a 60% reduction. His selling began when Musk showed interest in acquiring Twitter, citing concerns over distracted leadership.

“Ever since Elon went all in on Twitter, we started to pull back. This feud with Trump just accelerates our exit,” he stated.

Gerber’s continued divestment reflects a broader shift in investor sentiment, especially among institutional holders who had previously supported Tesla’s sky-high valuation.

Wall Street Downgrades Reflect Sentiment Shift

Tesla stock was once the darling of Wall Street, but that optimism is fading fast. The current consensus rating on NASDAQ:TSLA is a lukewarm “Hold,” and the average analyst price target of $292 reflects a mere 3% downside from current levels.

Firms like Morgan Stanley (NYSE:MS) and Barclays (NYSE:BCS) have recently trimmed their expectations for Tesla, citing a cloudy macroeconomic outlook, increased competition, and political risk.

What’s Next for Tesla Stock?

The ongoing Tesla stock crash underscores the volatility tied to Elon Musk’s public persona and political entanglements. While Tesla still holds a strong position in the global EV market, its valuation remains vulnerable to sentiment shifts, regulatory changes, and leadership controversies.

Investors will closely watch upcoming events, including Tesla’s Q3 earnings report and any developments related to EV subsidies. Until then, caution is advised.

Bottom Line

The Tesla stock crash highlights the risks of political drama and overvaluation. With shrinking tax incentives, skeptical analysts, and distracted leadership, TSLA faces a challenging road ahead.

Featured Image: Freepik

Please See Disclaimer