Electric vehicle (EV) and tech giant Tesla TSLA and its CEO Elon Musk have been synonymous for years. His vision, relentless energy and business acumen drove Tesla to become a giant in the EV industry. Under Musk, TSLA disrupted the auto world, just like Amazon changed retail and Netflix reshaped entertainment. When Musk unveiled a new car, fans got excited, and Tesla stock soared.

But things have changed. Instead of making headlines for Tesla’s groundbreaking innovations. Musk’s name is now getting increasingly tied to politics. And investors aren’t happy. Even the loyal Tesla fans are boycotting the brand.

Musk, who was once considered the driving force behind Tesla’s success and the company’s biggest asset, is now seemingly turning into a liability thanks to his growing political involvement.

The Anti-Musk Sentiment is Real

Musk’s embrace of right-wing politics is hurting Tesla. A recent survey from Electrifying.com revealed that 59% of potential buyers are discouraged from buying a Tesla because of Musk. Even more concerning, 61% of EV owners are considering switching to a Chinese brand.

Protests have erupted outside Tesla stores across major U.S. cities, including New York, Seattle and Kansas City. Demonstrators are calling out Musk’s ties to Trump and his push for deep government spending cuts. The backlash isn't limited to the United States. The anti-Musk sentiment is growing in Europe as well.

There are clear signs that some Tesla owners want to distance themselves from Musk. Bumper stickers saying, "I bought this before Elon went off the rails" are popping up, and more Tesla drivers are selling their cars in protest.

Tesla’s stock, which surged massively after Trump’s election win in the last two months of 2024, has wiped out all its gains. It’s a complete reversal from the days when Musk’s connections with Trump gave the stock a boost. Now, Tesla seems to be paying the price of Musk’s political ties.

TSLA shares have tumbled more than 30% year to date, underperforming its Mag 7 peers.

YTD Price Performance Comparison

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Musk’s Focus is Elsewhere When Tesla Sales are Crashing

As if running Tesla and SpaceX wasn’t enough, Musk is now deeply involved in Washington. As the head of President Trump’s Department of Government Efficiency (“DOGE”), he is leading aggressive cost-cutting measures, including forcing federal employees to justify their jobs. This political engagement is taking up more of his time and pulling his focus away from Tesla.

And it’s happening at the worst possible time. Tesla is facing slowing sales, rising competition and a tougher market. Vehicle deliveries are down across key regions. In January, Tesla sold 9,945 vehicles in Europe—a 45% year-over-year drop. China sales fell about 15% year over year in January, and last month, they plunged around 50%, per CPCA. With domestic brands like BYD Co Ltd BYDDY, NIO Inc. NIO, XPeng, and Li ramping up, Tesla’s position in China is under threat.

Back home, Tesla’s dominance is slipping as well. Sales in California declined throughout 2024, and the company’s U.S. EV market share fell below 50% last year, down from 63% in 2022. According to Wards Auto, Tesla’s BEV market share shrank from 59% in January 2024 to 45% in January 2025.

The decline underscores Tesla’s growing challenges after reporting its first-ever annual drop in global deliveries in 2024. Pressure is mounting on Musk to launch affordable models and accelerate autonomous driving—the cornerstone of Tesla’s long-term vision.

Investors believe the company needs Musk’s undivided attention now more than ever. Instead, he’s preoccupied with government affairs. And that is damaging Tesla’s brand appeal.

TSLA Moves Below 200-Day SMA

Tesla stock is displaying technical weakness, trading below its 50- and 200-day moving averages. On Tuesday, it dropped to new 2025 lows and closed under the 200-day moving average for the first time since August 2024. This decline comes as Trump's tariffs take effect, prompting Canada and China to impose their own duties.

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Morgan Stanley Reinstates Tesla as “Top Pick”

Despite challenges, Morgan Stanley has named Tesla its "Top Pick" among U.S. automakers, citing its push into AI and robotics.

For over a year, Elon Musk has urged investors to see Tesla beyond just EVs, emphasizing AI and robotics. On the latest earnings call, he claimed Tesla's Optimus robot could generate over $10 trillion in revenues in the long term. Musk expects to build thousands of Optimus units this year—possibly 10,000—using them in Tesla factories for repetitive tasks. By late 2025, he hopes to sell them to external companies.

Tesla is also gearing up to launch unsupervised Full Self-Driving (FSD) in Austin this June, following the release of FSD Version 13 in December. The company is already running autonomous vehicles (AV) at its Fremont factory and plans to expand unsupervised FSD across the United States, pending regulatory approvals. Just last week, Tesla filed for regulatory approval in California to launch a ride-hailing service. While Tesla faces mounting pressure, its AV and robotics initiatives could shape its future beyond the EV market.

What Should Investors Do?

Tesla’s brand image is clearly taking a hit amid Musk’s political ambitions. With the stock slipping below its 200-day SMA, if you’re considering buying the dip—think twice. Tesla faces multiple challenges and must prove it can meet its 2025 targets. Expect the stock to stay highly reactive to Musk’s actions, with further downside risk if political backlash intensifies.

That said, Tesla still boasts strong technology, a growing energy storage business, a solid balance sheet and an extensive supercharger network. For potential investors, keeping an eye on Tesla’s autonomous vehicle progress is key, as FSD approvals and robotaxi advancements could drive long-term growth.

For existing shareholders, patience may be wise, and they should wait for a better exit point. Long-term holders may want to stay invested in Tesla’s future potential despite near-term volatility.

The Zacks Consensus Estimate for TSLA’s first-quarter and second-quarter EPS has declined over the past 30 days. Full-year 2025 estimates remain unchanged, while 2026 projections have been revised upward over the past 30 days.

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TSLA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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