Tesla's Success and Musk's Political Fortunes Might be in a Fatal Embrace

For the most part, I have tried to stick to discussing factual information with, of course, many of my opinions mixed in. Today, I'll do something different and try my hand at speculation. I have to warn readers that I am a poor speculator. Were it otherwise, I would have made a bazillion dollars by now by correctly picking stocks to buy. Alas, I remain a humble website owner, lacking the means to purchase a U.S. Supreme Court justice or even a Wisconsin State Supreme Court justice. But, luckily, speculation is free and, therefore, I can afford it. The topic of my prognostications, or let's face it, guesses, is the interdependency of Shadow President Elon Musk's political and financial fortunes. More specifically, my argument is that a decline in one area will negatively impact the other. Hence, the victory by Susan Crawford yesterday in an election for a seat on the Wisconsin State Supreme Court will result in financial losses for Musk, particularly in the case of Tesla.

By way of background, Supreme Court races in Wisconsin are technically nonpartisan. However, like much of our country, the justices on the court have become increasingly partisan. For years, conservative justices held a majority, which they used to enable a host of Republican policies and to thwart Democratic initiatives. This included everything from redistricting to women's reproductive rights. In 2023, however, Janet Protasiewicz won, giving the liberal justices a majority. This year, the election was to replace Ann Walsh Bradley, another liberal justice. Her replacement would decide whether liberals would continue in the majority or whether that would be returned to conservatives. The Democratic Party supported Susan Crawford, while the Republican Party supported Brad Schimel. Yesterday, Crawford soundly defeated Schimel.

For reasons that are not entirely clear to me, Musk decided to get involved in this election in a big way. Musk may have been motivated by a Wisconsin law that prohibits Tesla from opening car dealerships in the state. The law requires that dealerships be owned by third parties, not manufacturers. Tesla is currently suing to overturn the law, and Musk may have been hoping to place a sympathizer on the state's highest court. Musk and political groups that he controls contributed more than $25 million supporting Schimel and opposing Crawford. Musk made campaign appearances and held rallies in the state. He organized a petition drive in which those who signed would receive $100.00, and Musk personally gave away two $1 million checks to petition signers (one of whom "coincidentally" was the chair of the Wisconsin College Republicans). Musk made grandiose claims about the importance of the election, at one point writing on his X social media network that it "might decide the future of America and Western Civilization!"

Musk may have also been hoping to increase his own political capital. Musk contributed millions to support the election of cult leader, convicted felon, and failed President Donald Trump, campaigning in swing states and running similar petition drives. His financial contributions were apparently enough to convince Trump of his importance. Since Trump's inauguration, Musk has been extremely influential within the executive branch, where Trump made him a "special government employee." Despite claims made in court to the contrary, Musk clearly appears to be leading the U.S. DOGE Service that is responsible for massive cuts to the federal workforce and has stopped considerable amounts of government spending. Musk has used his financial resources to threaten Republican members of Congress with primary opponents if they don't fall into line behind Trump. Perhaps Musk viewed the Wisconsin election as another opportunity to establish his political bona fides.

In business, Musk has thrived on image over substance. He routinely makes claims about Tesla that are not grounded in reality. For instance, he has promised that full self-driving would be available "next year" for at least a decade. It has still not arrived. But Musk's outlandish claims have pushed the value of Tesla far beyond any reasonable measure. Musk's contributions to Trump's election victory similarly inflated his political value. In both business and politics, Musk faces a risk that his image will begin to work against him. If the widespread view of Musk is no longer that he is a visionary genius, but rather — in a term that Trump likes to use — a loser, the air is going to go out of both Musk's business and political balloons fairly rapidly. At least that is my speculation.

My further speculation is that the Wisconsin State Supreme Court election outcome may be the start of that downward cycle. After Trump's election victory, Tesla's stock price rose massively as many believed that Musk would use his newfound political influence to support the company. When Musk's antics involving DOGE generated considerable political backlash, essentially all of those gains were lost. The connection between Tesla's value and Musk's political fortunes has already been established. But the Wisconsin results make clear that Musk has become a political liability. Wisconsin Democrats ran almost exclusively against Musk, all but ignoring Schimel other than to paint him as beholden to Musk. In another statewide race that was also on the ballot, the vote for the Superintendent of Public Instruction, the Democratic-supported candidate, also won, but by a much narrower margin than Crawford. That suggests that Musk was actually a negative draw on Schimel. It is unlikely that Republicans in close races will want Musk to be anywhere near them after this outcome. It seems obvious to me that Musk's political capital has taken a gigantic hit. Based on my speculation, Tesla's value, as represented by its stock price, should take a similarly large hit.

The stock market opened today with Tesla's stock down more than 5%. But this may have nothing to do with the Wisconsin vote. Tesla sales in Europe are way down, 43% year-over-year. Tesla is reportedly sitting on $200 million worth of Cybertruck inventory, unable to sell the vehicles. Tesla's worldwide sales numbers, just announced today, show that Tesla failed to meet analysts' expectations, which had been significantly lowered. Tesla sales were down 13% year-over-year and 32% quarter-over-quarter. This is dreadful news for a company whose stock price is based on expectations of growth. So, one would expect Tesla's stock price to take a beating today regardless of the outcome of the Wisconsin election. Therefore, attributing that drop to the election may be a mistake. But, I would argue, it doesn't matter. The reason that Tesla is selling fewer cars is because of Musk, and Musk is a deterrent because of his political activities. This is what is driving the Tesla Takedown movement. Musk is politically radioactive, and that radioactivity is affecting Tesla. To the extent that Musk is losing political clout, the Wisconsin outcome only makes things worse for him, and that makes things worse for Tesla.

There is a clear dependence between Musk's political power and the value of Tesla. Without the wealth that Tesla provides, Musk would not have the political influence that he does. As noted above, that political influence contributed to a significant increase in Tesla's stock price after the November election. Many analysts described Musk's political contributions as a good investment because he earned them back, and more, in stock price increases. Now, the opposite is true. Not only are Musk's political contributions going for naught, they are negatively impacting Tesla's stock price, which is the basis of his wealth. Conceivably, at this point, the more Musk spends politically, the more Tesla's stock will suffer. Financially, Musk may be forced to remove himself from politics altogether. But, the damage may well already be done. Will Musk still be able to spin reality so as to convince investors that Tesla has a great future? That probably depends on Tesla sales over the next two quarters. Musk is attributing slow sales in the 1st quarter to the Model Y switchover that occurred during that time period. But, if sales continue to drop or do not recover significantly over the next two quarters, Tesla will be in serious trouble. If Musk is a political pariah during that time, he will have little to offer politicians of any stripe and little to offer Tesla as well.

But, there is another option. Might Musk be able to influence Trump in such a manner that the government comes to Tesla's rescue? Today, Trump is expected to announce new tariffs. The tariffs are expected to favor Tesla given that Teslas are assembled in the United States. However, rules and regulations can be implemented to help or hurt to various degrees. Maybe Trump will allow things to be done in a manner that maximizes the benefit to Tesla? The question then becomes, why? Why would Trump help Musk if Musk has little to offer in return? If Musk's political influence has been lost or at least significantly eroded, can he provide anything of value to Trump? This is where the outcome in Wisconsin matters. Wisconsin proves that Musk's money is not enough and that Musk's personal appeal is actually a negative. Perhaps Trump won't see enough in it for him?

I don't think I am speculating when I say that Tesla and Musk's political influence are intertwined and interdependent. I would suggest that is simply a fact. What I am speculating about is the importance of the Musk-supported candidate being defeated in Wisconsin. I think that will have a nearly seismic impact. While Tesla's stock is likely in trouble independent of Musk's political record, the Wisconsin outcome punches a big hole in a balloon that Musk is struggling to keep inflated. Musk's friends will be discouraged and his enemies will be heartened. Both in the case of Tesla and in politics, Musk is increasingly looking like a loser.

Update: Just after I published this, Politico released an article headlined, "Trump Tells Inner Circle That Musk Will Leave Soon" that is splashed across the home page in a font size suitable for announcing a declaration of war. As the article acknowledges, both Trump and Musk have previously talked about the likelihood of Musk leaving. Since this is not really breaking news, it is hard to see this treatment of the topic as anything more than a PR effort to take attention away from the twin set backs that Musk has suffered between the Wisconsin election and telling Tesla sales. Ironically, the article had the effect of reversing Tesla's stock price trend, While it had been heading down prior to publication, it turned around and is now up. Presumably, investors believe that this means that Musk will pay more attention to Tesla and there will be less political fallout. Given the sales figures, I would consider this to be extremely overly optimistic.