Tesla opened the week with a sharp drop — shares fell 6.4% in early Monday trading and the reasons aren’t purely technical.

First, the headlines: Elon Musk announced plans to form a new political party, a move that quickly stirred reaction across the spectrum and drew fresh criticism from former President Trump. While Tesla and Musk have never been fully separable, this new chapter adds another layer of distraction for investors.

But the pressure wasn’t just political. William Blair downgraded Tesla to Market Perform, citing two main issues:

  • Demand headwinds, particularly in North America and Europe
  • Policy shifts in the new budget bill, which rolled back key EV tax credits and regulatory benefits Tesla had been leaning on
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It’s a notable shift in tone, especially from an analyst base that’s long tolerated Musk’s volatility in exchange for growth. Now, with pricing pressure rising and margin support weakening, the bar is higher.

📌 What to watch

  • Institutional reaction: Is this a one-day move, or a sign of broader repositioning?
  • Policy fallout: How deep do the EV subsidy cuts go — and who absorbs the brunt?
  • Delivery guidance next quarter: Any revision could ripple across the whole EV sector
  • Sentiment around Musk: More public political moves may widen the disconnect between brand value and shareholder tolerance

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