• Tesla faces policy uncertainty as House bill slashes EV incentives, drawing sharp criticism from Elon Musk.
  • Trump warns Musk "could lose a lot more" than EV subsidies amid public feud over government spending.
  • Market analysts flag risks to Tesla's U.S. dominance as consumer EV demand shows signs of softening.

Political Feud Hits Tesla's Core Business

The longstanding but uneasy alliance between Elon Musk and Donald Trump has fractured publicly after the House passed legislation eliminating most federal electric vehicle subsidies and mandates. Trump claimed the Tesla CEO was "upset" about losing the EV tax credits that have buoyed Tesla sales, but warned pointedly that Musk "could lose a lot more than that"—a veiled reference to SpaceX and other government contracts.

Musk fired back by calling the broader spending bill "fiscally irresponsible," creating an unusual scenario where he simultaneously supported cutting EV incentives while opposing other provisions. The public spat comes at a precarious moment for Tesla, which has seen slowing sales growth amid cooling EV demand. A recent AAA survey found only 16% of U.S. adults now plan an EV for their next car purchase.

Policy Shift Rattles Industry

The proposed legislation would rescind the $7,500 federal EV tax credit and eliminate Zero Emission Vehicle mandates—policies that have driven Tesla's mass-market expansion. "This isn't just about Tesla losing subsidies," said one auto industry analyst who asked not to be named due to client relationships. "It's about whether America stays competitive in EVs while China and Europe double down on their industries."

Internal Tesla projections reviewed by sources suggest the policy changes could impact up to 15% of U.S. Model 3 and Y sales, primarily among price-sensitive buyers. The company has not commented publicly on potential pricing adjustments, though Musk hinted at "other levers" during a recent all-hands meeting.

Market Fallout

Tesla shares fell 3.2% in after-hours trading following Trump's remarks, extending this month's decline to 12%. Options activity shows growing bets against the stock, with put volume hitting a three-month high. Meanwhile, legacy automakers have quietly slowed EV production targets, with Ford postponing $12 billion in planned EV investments last week.

Correction: An earlier version misstated the percentage of U.S. adults considering EV purchases. The correct figure is 16%, not 18%.