The Tesla stock plummeted on June 5, 2025, primarily due to a public dispute between Elon Musk and Donald Trump. The conflict escalated on social media, with Trump suggesting that public contracts with Musk's companies, including Tesla, could be withdrawn. This threat led to a massive loss of investor confidence, triggering the stock's crash.
Reasons for the Tesla crash
- Musk-Trump Conflict: The dispute began with Musk's criticism of Trump's tax law and intensified through mutual attacks on social media. Trump's threat to cut government contracts hit Tesla hard, as such contracts bolster confidence in the company's future prospects.
- Market Sentiment and Short Selling: Musk's already volatile reputation and Tesla's high valuation make the stock vulnerable to such events. Short sellers, betting on falling prices, amplified the pressure.
- Existing Challenges: Tesla is already grappling with declining automotive margins, falling deliveries, and economic uncertainties, which further weighed on the stock.
Extent of the Crash
At the closing bell on 5 June 2025, the Tesla stock price fell by around 14.2%, and the decline initially continued in after-hours trading. One hour after the close of trading, the Tesla share price fell by a further 2%. It remains to be seen whether the dispute between Musk and Trump will continue or even intensify. However, Tesla's share price is likely to see a sharp increase in volatility in the coming days or weeks.
Advertisement
