Baird Downgrades Tesla Amid Trump-Musk Tensions and Robotaxi Challenges

In a significant shift in market sentiment, Baird & Co. has downgraded its rating on Tesla, Inc. from 'buy' to 'neutral', citing concerns over an overly optimistic outlook regarding the company's upcoming robotaxi rollout and ongoing tensions between CEO Elon Musk and former President Donald Trump. The downgrade, announced on June 9, 2025, comes at a time when Tesla's shares have succumbed to a notable decline, dropping 27% year-to-date.

Analyst Ben Kallo of Baird emphasized in his report that the anticipated ramp-up of Tesla's robotaxi service is likely too ambitious. "We believe Musk's comments regarding the robotaxi ramp rate are a bit too optimistic, and we believe this excitement has been priced into shares," Kallo stated. The firm has maintained its price target for Tesla at $320, which suggests an approximate 8% upside from the stock's closing price prior to the downgrade.

Musk's recent assertions regarding the deployment of robotaxis in Austin by the end of June further complicate the situation. According to the CEO, Tesla is poised to revolutionize urban transportation with its fleet of autonomous vehicles. However, industry analysts caution that heightened competition in the electric vehicle market and the complexities of regulatory approvals may hinder this ambitious timeline.

The discord between Musk and Trump, which has escalated recently, adds another layer of uncertainty to Tesla's market performance. The feud originated after Musk resigned from his position as a "special government employee" and subsequently criticized Trump on social media, claiming that Trump could not have achieved his electoral success without his influence. Musk's remarks included allegations linking Trump to investigations involving Jeffrey Epstein, further straining their relationship. In retaliation, Trump has threatened to revoke Musk's government contracts, raising concerns about potential ramifications for Tesla's operations.

Kallo highlighted, "The recent incident between Musk and President Trump exemplifies key-person risk associated with Musk's political activities. While we have no indication of how the relationship may change or what either will do, we see the situation as adding uncertainty to TSLA's outlook." While Baird remains optimistic about Tesla's long-term prospects, the firm has opted to adopt a more cautious stance in the short term.

Following the downgrade, Tesla's stock experienced a decline of more than 2% in premarket trading, reflecting investor apprehension over the company's immediate future. As the electric vehicle landscape continues to evolve, stakeholders are left to ponder how political dynamics and ambitious technological developments will shape Tesla's trajectory in the coming months.

In conclusion, Baird's downgrade of Tesla underscores the complexities facing the electric vehicle manufacturer, combining ambitious technology plans with the unpredictable nature of political relations. Investors and analysts alike will be closely monitoring how these factors will influence Tesla's performance and market position in a rapidly changing automotive landscape. The implications of this situation extend beyond Tesla, potentially affecting investor sentiment across the electric vehicle sector as competition intensifies and political landscapes shift.