Tesla Stock Plunges, Erasing $460 Billion as Musk’s Political Gambit Sparks Investor Exodus

In a stunning reversal of fortune, Tesla Inc. has just endured one of the worst quarters in its 15-year history on the public markets, shedding over 36% of its value and wiping out an eye-watering $460 billion in market capitalization. The electric vehicle (EV) giant, long considered a bellwether of innovation and investor optimism, now finds itself at the center of a financial and political firestorm—one largely of its own making.The first quarter of 2025 marks Tesla’s third-steepest quarterly drop ever, with only the final quarter of 2022 being more catastrophic, when shares plummeted 54% amid then-CEO Elon Musk’s chaotic $44 billion acquisition of Twitter (now X). At the time, Musk sold more than $22 billion in Tesla stock to finance the deal, triggering panic among investors. Now, history appears to be repeating itself—albeit under a different guise.

While Tesla’s declining sales in Europe and China and stiffening EV competition certainly contributed to the downturn, analysts say the company’s most pressing issue may not be automotive—it’s political.

Much of Q1 coincided with Musk’s newly minted role as head of the Department of Government Efficiency, or DOGE—a federal initiative born out of the second Trump administration with a mandate to slash government spending and eliminate bureaucracy. As of late March, the DOGE program claimed to have reduced federal spending by $140 billion.

Yet, that figure is dwarfed by the $460 billion investors just watched evaporate from Tesla’s market value—a number more than three times larger than DOGE’s purported savings.

“My Tesla stock and the stock of everyone who holds Tesla has gone, went roughly in half,” Musk admitted during a Sunday rally in Green Bay, Wisconsin. Ostensibly there to support a conservative candidate for the state Supreme Court, Musk instead found himself defending the economic fallout of his political moonlighting.

For shareholders, Musk’s increasing involvement in national politics and policy has become a lightning rod for controversy. Once heralded as a visionary CEO who could juggle multiple companies across sectors, Musk is now being viewed by some institutional investors as a liability.

“Tesla investors didn’t sign up to be part of a de facto political movement,” said Karen Holtzman, a senior analyst at Trident Capital. “Musk is a walking conflict of interest. You cannot lead a public company and run a government department while campaigning on behalf of partisan judges and making federal workforce cuts.”

Public confidence in Musk’s leadership appears to be waning. According to data from the car-buying site Edmunds, trade-ins of Teslas for other vehicles—both new and used—have hit a record high since Musk began his tenure at DOGE.Adding to the uncertainty are rising reports of vandalism against Tesla vehicles, incidents which some attribute to backlash against Musk’s increasingly politicized image. Social media posts and viral videos have shown Tesla cars being keyed, defaced, or otherwise targeted, feeding a perception that owning a Tesla is no longer just a consumer choice, but a political statement.

While Musk’s political pivot may be stealing headlines, Tesla’s core business is also under siege.Once the undisputed leader in the EV space, Tesla is now struggling to keep pace with global competitors. Nowhere is this clearer than in China, where homegrown titan BYD continues to widen the gap. In Q1 2024, BYD accounted for 32% of new EV sales in the Chinese market. Tesla? Just over 6%.The reasons are manifold. BYD has made significant strides in fast-charging technology and vehicle affordability, key pain points that continue to plague Tesla’s offerings. In Europe, similar trends are emerging as legacy automakers and nimble startups alike flood the EV market with alternatives that are often better suited to regional demands.