Elon Musk's Conflict with Trump Threatens Tesla's Financial Stability

In the wake of a public fallout between Elon Musk, CEO of Tesla, and former President Donald Trump, the electric vehicle manufacturer faces potential losses amounting to billions of dollars in government subsidies that have been critical to its financial success. This situation raises significant concerns regarding Tesla's business model and market valuation as federal and state support for green industries wanes.

According to an analysis by the Sky News Data & Forensics team, subsidies have played a pivotal role in Tesla's growth, accounting for at least 38% of its profits, which reached $7.1 billion in 2024. Of this, approximately $2.8 billion was generated from trading regulatory credits—state-level subsidies designed to encourage the production of electric vehicles. Without these financial supports, Tesla's viability as a leading producer of electric vehicles could be severely compromised.

In recent statements, Trump has indicated his intent to cut subsidies for green industries, suggesting that Musk has benefited excessively from such government assistance. During a Truth Social post, Trump remarked, "Elon may get more subsidy than any human being in history, by far, and, without subsidies, Elon would probably have to close up shop and head back to South Africa." This rhetoric aligns with Trump's broader agenda to reduce state support for environmental initiatives, which could jeopardize Tesla's revenue streams.

Tesla's financial health has already been impacted by declining sales amid increasing competition in the electric vehicle market. The company reported total revenues of $98 billion for 2024, with automotive sales contributing $72 billion. However, a troubling trend has emerged; Tesla's sales in key markets, such as Germany and Australia, have plummeted by 58% and 62%, respectively, in the first four months of 2025.

The company has relied heavily on a federal tax credit of $7,500 available to consumers purchasing electric vehicles. This credit is projected to have provided approximately $4.7 billion in discounts for over 630,000 Tesla vehicles sold in the U.S. last year. Yet, Trump's tax reform legislation has eliminated this credit, further threatening demand for Tesla's products.

Ross Gerber, an early investor in Tesla, warned that the proposed cuts by Trump could lead to dire consequences for the company. He stated, "If all of these government programmes were taken away, Tesla would go into losing money and burning cash and the stock would implode." Gerber has begun to sell off his investments in Tesla, citing the growing risks associated with Musk’s political entanglements and the company's shifting market dynamics.

Conversely, some analysts maintain an optimistic outlook on Tesla's future. Dan Ives, a senior analyst at Wedbush Securities and a long-time supporter of Musk, believes that Tesla's innovation in AI and self-driving technology will mitigate the adverse effects of subsidy withdrawal. Ives noted, "We believe Tesla remains the most undervalued AI play in the market today," suggesting that the company's technological advancements could continue to drive its market performance despite political challenges.

Tesla's success has historically relied on a combination of innovation and substantial government assistance aimed at promoting low-carbon technologies. The removal of these incentives poses significant challenges not only for Tesla but for the broader electric vehicle market as competitors emerge. As the industry evolves, the implications of this ongoing dispute between Musk and Trump will likely reverberate beyond Tesla, affecting policies and investments in the green technology sector.

As the landscape continues to shift, stakeholders across the automotive and energy sectors will need to closely monitor how these developments unfold. The future of Tesla, once a beacon of innovation in the electric vehicle space, hangs in the balance as it grapples with the fallout from this high-profile conflict.