Tesla (NASDAQ: TSLA) shares are under pressure after a Wall Street analyst downgraded the equity, which has plunged below the key $300 level in pre-market trading.
Tesla closed the previous session at $315.35 but is down 6.5% before the opening bell, trading around $294.
The sharp drop follows a downgrade from investment bank William Blair, which cut its rating on Tesla to ‘Market Perform’ from ‘Outperform’.
Analyst Jed Dorsheimer explained that while markets had largely anticipated the removal of the $7,500 U.S. EV tax credit under the “Big Beautiful Bill” (BBB), another policy change took many by surprise: the elimination of corporate average fuel economy (CAFE) fines.
According to Dorsheimer, losing the EV tax credit will likely hurt demand for Tesla vehicles; however, the bigger concern is the risk to more than $2 billion in profit that the company has historically earned from selling regulatory credits.
Unlike the demand-side impact of the EV tax credit, that shortfall would directly hit Tesla’s profitability.
“The combination of a demand headwind and over $2 billion in profit from regulatory credits at risk may be too much for investors to bear. As such, we are downgrading to Market Perform,” Dorsheimer said.
Musk’s political involvement
Beyond the downgrade, Tesla stock is also facing pressure from investors wary of CEO Elon Musk’s political ambitions, just weeks after exiting the Donald Trump administration.
Losses have been fueled further by Musk’s announcement that he is creating a new political party amid his feud with President Trump over the sweeping tax bill projected to increase the country’s tax burden.
To this end, Tesla analyst and longtime bull Dan Ives said investors are showing a “sense of exhaustion” over Musk’s insistence on spending time in politics.
In his note, Ives said Musk’s exit from the Trump administration offered Tesla investors some relief, easing concerns that the company wasn’t getting enough of his focus.
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