Could Elon Musk's endorsement of Donald Trump hurt Tesla stock?

Elon Musk’s full-throated endorsement of former president Donald Trump could hit him where it hurts – in his Tesla stock.

It was reported that Musk, who has backed Trump for president, had vowed to give as much as $45 million per month to the campaign.

However, Musk in recent days has denied the reporting.

The SpaceX CEO in an interview insisted he does not ‘prescribe to a cult of personality’ – though he praised Trump as showing ‘great courage’ in the aftermath of the shooting.

But why could the endorsement of Trump hurt Tesla stock?

Let’s take a closer look:

What happened?

Musk endorsed Trump in the aftermath of his attempted assassination at a Pennsylvania rally.

“I fully endorse President Trump and hope for his rapid recovery,” the Tesla chief posted on X.

The Wall Street Journal then reported that Musk would donate $45 million per month to the Trump re-election campaign.

However, much has changed in two weeks.

President Joe Biden, for one thing, is no longer seeking a return to office.

“I believe in an America that maximizes individual freedom and merit. That used to be the Democratic Party, but now the pendulum has swung to the Republican Party,” Mr Musk wrote on X after Biden dropped out.

But the Democrats are rallying behind their presumptive nominee Kamala and have raised a staggering amount of cash. The polls also show that Kamala is faring better against Trump than Biden.

On Thursday, Musk described the reporting ‘ridiculous.’

“What’s been reported in the media is simply not true,” Musk said. “I am not donating $45 million a month to Trump.”

“I am making some donations to America PAC, but at a much lower level and the key values of the PAC are supporting a meritocracy & individual freedom. Republicans are mostly, but not entirely, on the side of merit & freedom,” Musk wrote on X.

Why would the Tesla stock be hurt?

Because Democrats and progressives are big buyers of Tesla Electric Vehicles — or at least they used to be.

The Wall Street Journal quoted research firm Strategic Vision’s New Vehicle Experience Study as saying that Democrats comprised 40 per cent of the sales for the 2022 and 2023 model years.

However, that number shrunk to just 15 per cent at the start of the 2024 model year.

Meanwhile, Republicans aren’t exactly flocking to purchase Tesla’s EVs.

In 2022, Republicans accounted for 29 per cent of purchases of Tesla EVs – which rose to 32 per cent in 2023.

Independents, interestingly, bought Tesla EVs in droves in 2023 – accounting for 44 per cent of all sales compared to 28 per cent in 2022.

Now, new reporting from Yahoo Finance shows that Tesla has become even less popular with Democrats.

The outlet cited data from analytics firm CivicScience as showing that Tesla’s favourability numbers among Democrats dropped to 16 per cent last week.

That number was at 39 per cent in January.

CivicScience told Yahoo Finance its survey results consistently show “that Democrats, more closely than Republicans, associate Elon Musk and his actions with the brand."

Alarmingly for Musk, Tesla’s favourability ratings among Republicans also dropped from 35 per cent to 23 per cent.

Meanwhile, California’s registrations of the Tesla’s Model Y fell 17 per cent in the first quarter of 2024 compared to the first quarter of 2023, as per INC.com.

“Californians’ love affair with electric vehicle giant Tesla may have peaked,” the dealers association said in April as per QZ

All this comes as Tesla is faces fierce competition globally from Chinese electric-vehicle makers flooding the market with low-priced cars.

On Tuesday, Tesla’s profit sank 40 per cent compared to last year.

Meanwhile, the company’s shares tanked around eight per cent.

The company stock is down around 1 per cent overall this year.

Musk also has to trend to his sprawling empire which includes rocket-maker SpaceX, brain-chip developer Neuralink, and social media giant X, which Musk acquired in 2022.

Formerly called Twitter, the platform has foundered under Musk’s volatile management, shedding most of its value as the company has lost revenue and advertisers.

What do experts say?

Some experts say Tesla is on the way down – and Musk isn’t helping.

Tesla’s image as a climate-friendly innovator has also suffered with Musk’s tilt toward right-wing politics and polarising public statements, which have turned away some prospective Tesla buyers, experts say.

Yahoo Finance quoted investor Mark Spiegel as saying, “He completely alienated most of his buying base.”

“It’s going to kill the business. I can’t imagine a single Democrat, or, let’s say, very few of them, willing to buy a Tesla at this point.”

Research firm Edmunds on Tuesday noted, “As America’s partisan divides widen, Elon Musk’s very public support of former President Donald Trump has the potential to alienate Democratic-leaning consumers who are more likely to be EV buyers, and could therefore pose a significant threat to Tesla’s bottom line,” Edmunds head of insight Jessica Caldwell said in a note to clients.

But others disagree.

Strategic Vision president Alexander Edwards told Fortune that Democrats earlier dumped Tesla in favour of EVs such as the Cadillac Lyriq, Hyundai Ioniq 6 EV and Santa Fe hybrid, and Mercedes-Benz EQE SUV.

Edwards said in the past such Democratic voter ‘boycotts’ of Tesla have been short-lived.

“They want to support EV sales, and the price for a Tesla today is often too good to pass up,” he told Fortune.

Experts also say Tesla’s stock value has long been based on future expectations for mass-market sales and driverless cars rather than its current sales and profits.

Musk, meanwhile, is betting on fully electric cars, planes and ships — as well as robotaxis.

“My predictions on this have been overly optimistic in the past,” Musk admitted as per CNN.

With inputs from agencies