Tesla shares fell sharply in US trading on Thursday after the sudden eruption of a public spat between boss Elon Musk and President Donald Trump sparked fears of reprisals for the electric car giant. Trump threatened to terminate ‘Elon’s governmental subsidies and contracts’ on his social messaging service Truth Social after a disagreement over the President’s budget bill saw the pair exchange accusations and insults. US subsidies and contracts at Federal and state level are worth billions to Tesla, which also currently benefits from a $7,500 tax credit available for electric vehicle purchases.

Trump wrote: ‘The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts. I was always surprised that Biden didn’t do it!’ Tesla shares fell more than 14 per cent by the end of US trading, wiping $150billion off the carmaker’s market capitalisation.

Analysts at Wedbush said: ‘The quickly deteriorating friendship and now ‘major beef’ between Musk and Trump is jaw dropping and a shock to the market and putting major fear for Tesla investors on what is ahead. This situation between Musk and Trump could start to settle down and the friendship continues but this must start to be calmed down on the Musk and Trump fronts and it’s not good for either side. This feud does not change our bullish view of Tesla and the autonomous view but clearly does put a fly in the ointment of the Trump regulatory framework going forward.’

Musk’s relationship with the President has been a major driver of Tesla’s fortunes, for better and for worse, over the last two years. Tesla shares rose more than 60 per cent between the start of November when Trump was elected to the end of 2024. But investor pressure over Musk’s controversial role in the White House ultimately led to him to stepping down from his unofficial ‘DOGE’ department, which had sparked protests and vandalism directed at Tesla.

The controversy also appears to have weighed on Tesla sales. Tesla shares were on a run more recently, however, after Musk confirmed the group would be testing an autonomous, driverless ‘robotaxi’ service in Austin, Texas, this month. Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: ‘Investing in Tesla isn’t for the faint of heart, and Musk’s enthusiasm for topics close to heart is both a blessing and, at times, a curse.

‘Let’s not forget, Tesla has its own battles, with disappointing sales numbers and brand damage weighing on sentiment in the near term. For now, markets are willing to look past the weakening auto business with AI and automation the real prizes. But with such a pivotal few months ahead for the autonomous strategy, investors will want to see Musk give his full attention back to Tesla,’ Britzman concluded.

Richard Hunter, head of markets at Interactive Investor, added: ‘Perhaps more importantly, the latest feud has also heightened unease that the President’s seemingly irascible and erratic behaviour is symptomatic of the environment which has been created on a global scale. Companies have already been stepping back from providing guidance comments for the next few months, while consumer sentiment is brittle given the wider context of what could be a weakening outlook.’