In the days following Donald Trump’s victory last November, Elon Musk’s multimillion-dollar foray into electoral politics looked like one of the savviest investments of his career.
Hopes that the entrepreneur’s political influence would supercharge his businesses pushed Tesla back above $1tn in market value, making the richest man in the world — who spent just over a quarter of a billion dollars on Trump’s campaign — roughly $100bn richer.
But, by Musk’s own admission, his allegiance to Trump has instead led to damaging “blowback” for his flagship electric-car maker.
“It went from a Cinderella story to Nightmare on Elm Street,” said Dan Ives, a Wedbush Securities analyst who had initially cheered Musk’s closeness to the White House.
Rather than helping Tesla by easing regulations on the rollout of artificial intelligence and autonomous vehicles, Musk’s increasingly controversial role as head of the so-called Department of Government Efficiency (Doge) had caused “massive brand damage”, Ives added.
Facing investor pressure, and the prospect of having to explain a 70 per cent drop in first-quarter profits on Tuesday, Musk changed course.
He announced that he would step back from Doge starting next month, spending just a day or two a week on government work, and the rest of his time concentrating on his commercial interests.
Musk’s retreat came after consumers had reacted with outrage to Doge’s actions, as it gutted entire US government departments and culled tens of thousands of workers. Protests at dealerships and falling sales, especially in Europe, ended up wiping more than $800bn off Tesla’s market cap.
The billionaire’s star was simultaneously waning within Trump’s orbit. A Wisconsin Supreme Court candidate he backed lost badly earlier this month, and senior Republicans have increasingly expressed disquiet with the speed and depth of Doge’s cuts. Musk also clashed with cabinet members, including Treasury secretary Scott Bessent.
But in the months Musk spent at Trump’s side at Mar-a-Lago and Washington DC — during which he admitted he managed his businesses only “with great difficulty” — his companies have also been facing increasingly stiff competition from homegrown and Chinese rivals.
“This was the worst possible time for [Musk] to be distracted,” a person close to Musk said of his tenure at Doge.
For investors, the big uncertainty is whether Musk can distance himself from politics and, more fundamentally, whether his full attention on Tesla will be enough to help the company regain its competitive edge.
Even before the consumer backlash to Musk’s political activism, Tesla’s core automotive business had come under pressure from the rapid advance of electric vehicles by BYD and other Chinese rivals.
In the first quarter, Tesla ceded its crown as the world’s largest electric vehicle maker to BYD as its deliveries fell 13 per cent.
Tesla was struggling to keep pace with the speed of innovation and new product rollout in China, the world’s largest car market, analysts said. “With Chinese EVs evolving very quickly . . . it puts the requirement for Tesla to be able to move very fast to keep up,” Morningstar analyst Seth Goldstein said.
When Tesla launched its “Full Self Driving” system in China in February, it initially received a mixed reaction since Chinese rivals were offering similar capabilities at lower prices.
Both BYD and battery giant CATL have also developed high-speed charging systems that will allow EVs to be charged as quickly as it takes to fill a car with petrol.
Restrictions from both China and the US prohibit Tesla from fully rolling out its most advanced semi-autonomous capabilities in China over data privacy and security concerns.
On Tuesday, Musk said he did not “see anyone being able to compete” with Tesla’s autonomous vehicle technology, but conceded that Chinese consumers were “the most demanding”.
Tesla’s relationship with China, its second-largest market and home to one of its gigafactories and battery plants, has also been hurt by Trump’s trade war, which Musk has publicly opposed.
“I’m an advocate for free trade and lower tariffs,” Musk said on Tuesday. He added that he had “made [his] opinion clear to the President” and that he was “hopeful that the President will observe whether my predictions are more accurate than the predictions of others”.
Repairing relations with Beijing should be a priority for the Tesla chief, Ives said. He added Musk needs to follow the example of semiconductor group Nvidia’s chief executive Jensen Huang and “fly to China, handhold . . . [and] distance himself from [the tariffs].”
Musk’s other businesses, including SpaceX and xAI, have also faced challenges in recent months.
Along with the rest of the US artificial intelligence industry, xAI was rattled by a new model from a Chinese rival, Deepseek.
SpaceX’s massive Starship rocket exploded shortly after launch for a second consecutive time in March. The company, which has dominated the space market for years and was responsible for almost 90 per cent of the rockets launched from the US in 2024, is facing greater competition.
Jeff Bezos’ Blue Origin successfully reached orbit in January with the maiden flight of its heavy-lift New Glenn rocket — a competitor to SpaceX’s far larger Starship.
Amazon is challenging Musk’s Starlink satellite internet network with its rival Kuiper system. United Launch Alliance, a US-based SpaceX competitor, plans several launches of its Vulcan Centaur rocket in the coming months — and will help launch Kuiper’s satellites.
Musk’s political activity and comments about Ukraine, including attacks on President Volodymyr Zelenskyy, spurred foreign governments and corporations to seek alternatives to the billionaire’s ventures, with Amazon viewed as a viable option.
“People view [Musk] as mercurial, and he’s providing you this critical service. It is causing a massive backlash where customers are looking for a secure supply,” said Chris Quilty, an analyst at Quilty Space. “This is the one industry in the world that is rooting for Amazon.”
SpaceX and Tesla did not respond to requests for comment.
While he scales back his Doge work, Musk still has his social media platform X, which he has used in the past months to relentlessly promote the Trump administration, back far-right parties in Europe, and spread inaccurate claims about world leaders, including Britain’s Sir Keir Starmer.
In posts just hours after he vowed to refocus on Tesla, Musk amplified the jailed UK far-right activist Tommy Robinson, cheered a poll showing Germany’s AfD in the ascendancy, and supported the Trump administration’s border security crackdown.
The posts gave little evidence that the billionaire planned to fully exit the political arena. The person close to Musk said that, for the sake of his businesses, he needed “to be less of a political animal”.
