Elon Musk Might Not Start a New Political Party. Why Tesla Stock Is Slipping Anyway.

Tesla CEO Elon Musk said he would form a third political party, called the America Party. (Dreamstime)

Tesla stock fell on Wednesday, despite a report that Elon Musk might not create a third political party after all, which should have been music to shareholders’ ears.

Tesla stock lost 1.6%, closing at $323.90, while the S&P 500 fell 0.2% and the Dow Jones Industrial Average rose less than 0.1%.

The move came after The Wall Street Journal reported on Tuesday evening that Musk was “quietly pumping the brakes” on plans to start a third political party, citing people with “knowledge of his plans.” Tesla didn’t respond to a request for comment.

Pivoting away from politics is likely a positive for investors. Musk’s role in the Trump administration alienated some core Tesla buyers—politically left-leaning people looking to go green. Global vehicle sales dipped 13% year over year in the first half of 2025, with management citing business “challenges” due to “brand image.”

After Musk left the administration, his public feuding with President Donald Trump over government spending injected volatility into Tesla shares. The spat culminated in July with a promise to form the “America Party” as an alternative to Democrats and Republicans.

While investors likely prefer less politics, the early stock reaction shows that, to some extent, investors have moved on from the drama. Tesla stock might also be reacting to a post on X about Tesla’s vehicle lineup.

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Earlier this week, Tesla launched the Model Y “L” version in China. It’s a six-seat configuration with a third row of seats and captain’s chairs in the middle row. “This variant of the Model Y doesn’t start production in the US until the end of next year,” Musk said on Tuesday. “Might not ever, given the advent of self-driving in America.”

More model variations can help arrest Tesla’s sales decline, but Musk remains focused on the value from AI-trained self-driving cars.

Investors and Wall Street remain optimistic about the opportunity, too. William Blair analyst Jed Dorsheimer pegged the value of Tesla’s self-driving technology at almost $1 trillion in a recent report.

Coming into Wednesday trading, Tesla stock was down about 18% so far this year but up about 49% over the past 12 months.

Write to Al Root at allen.root@dowjones.com