Tesla’s board of directors is under mounting pressure to rein in CEO Elon Musk, after his surprise declaration on July 4th that he’s forming a political movement dubbed the “America Party” triggered a sharp selloff in Tesla stock.
The electric carmaker’s shares plunged nearly 7% on Monday, erasing over $68 billion in market capitalization — the latest blow in a year that has seen the company underperform its Big Tech peers and lose about a quarter of its value.
Wall Street, long known to indulge Musk’s unorthodox leadership style, is now calling for boundaries. Wedbush Securities analyst Daniel Ives, typically bullish on Tesla, published a scathing note Tuesday urging Tesla’s board to “act now,” warning that Musk’s deepening political entanglements could derail the company’s future at a pivotal moment.
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Musk’s Politics, Tesla’s Pain
Musk’s announcement of a third political party — one that he claims could influence 2–3 Senate seats and 8–10 House races — has jolted markets and intensified scrutiny on whether he can remain fully committed to Tesla’s mission at a time of rising global competition and slowing EV sales.
“This is a tipping point in the Tesla story,” Ives wrote. “The company cannot have Musk spending more and more time creating a political party which will require countless time, energy, and political capital.”
His proposed remedy: the board must swiftly roll out a new pay package granting Musk 25% voting control, establish clear limits on how much time Musk spends away from Tesla, and implement formal oversight on his political activities.
That first proposal, ironically, aligns with Musk’s own desire to consolidate more power at Tesla — yet the billionaire dismissed the advice with a terse “Shut up” directed at Ives on social media.
Still, Ives doubled down in a statement to CNBC: “Elon has his opinion and I get it, but we stand by what the right course of action is for the Board.”
Earlier this year, Musk was instrumental in launching the so-called Department of Government Efficiency (DOGE) under the Trump administration, a controversial unit tasked with slashing federal bureaucracy. His exit from that role in May had temporarily calmed investor nerves — until the party announcement reopened old wounds.
Now, analysts and stakeholders are openly questioning whether Tesla’s board has the independence or willpower to rein in Musk.
“Tesla is entering a key autonomous and robotics future ahead,” Ives wrote. “The Board needs to act with Musk and create the framework for Tesla to thrive. It starts now.”
William Blair analysts followed suit, downgrading Tesla stock this week from “buy” to “hold.” Their note cited Musk’s “distraction” and predicted continued downside for Tesla if his political energy isn’t redirected back toward mission-critical operations like the robotaxi rollout and AI development.
“We would prefer this effort to be channeled towards the robotaxi rollout at this critical juncture,” the analysts wrote. “Investors are growing tired.”
Even pro-Musk voices are showing discomfort. James Fishback, CEO of hedge fund Azoria Partners and a vocal Trump supporter, said over the weekend that his firm was shelving plans for an exchange-traded fund focused on Tesla.
“Elon has gone too far,” Fishback said on X. He urged Tesla’s board to meet immediately, ask Musk to clarify his intentions, and determine whether they are compatible with full-time CEO responsibilities.
Market Risks Mount, While Tesla Stumbles
Tesla’s challenges go beyond boardroom dynamics. The company reported a 14% drop in car deliveries in Q2 — its largest year-over-year decline in years — as global competition, particularly from China’s BYD, intensifies. BYD has now overtaken Tesla as the world’s top EV seller, a development analysts say reflects how geopolitical tensions and local preferences are shifting EV demand.
In the U.S., political uncertainty is now colliding with the business model. Musk has criticized a new federal spending bill cutting EV subsidies and support for solar and wind — key areas that have historically boosted Tesla’s fortunes. His fallout with President Trump, who now calls the Tesla boss “off the rails,” adds a layer of unpredictability in a market that’s increasingly policy-sensitive.
Musk’s political persona may also be eroding Tesla’s global brand appeal, especially in Europe, where environmentally conscious consumers are souring on the company. Analysts say that the billionaire’s polarizing rhetoric risks alienating large swaths of the customer base, just as newer entrants and legacy automakers ramp up their EV offerings.
Amid all this, Tesla is still locked in a legal battle over Musk’s compensation. A Delaware judge voided his historic $56 billion pay package in January, ruling that the board failed to negotiate the deal independently or at arm’s length. That case is under appeal, and Tesla is currently deliberating what a new package should entail — a process now complicated by Musk’s public threats to shift focus elsewhere unless his control is secured.
Compounding concerns, Tesla has yet to deliver on key promises. The Cybertruck rollout, touted to boost the company’s declining sales, was a flop. The company’s highly touted robotaxi platform remains largely in testing, while competitors like Waymo and Cruise have moved ahead in select U.S. cities. Tesla’s solar energy business has also stagnated, and Full Self Driving (FSD) remains in beta despite years of promotion.
For many investors and analysts, this moment feels like an inflection point. The debate now centers on whether Tesla can evolve from a company led by a mercurial visionary into a more stable, shareholder-focused enterprise — or whether Musk’s increasingly personal battles will continue to eclipse its mission.
Musk and Tesla’s board — including chair Robyn Denholm and IR chief Travis Axelrod — have not responded to the growing criticism. The silence is deepening frustration among shareholders looking for reassurance that someone at the company is steering the wheel.