Musk, Trump fallout is bad news for Tesla and EVs

The big picture: Tesla investors have been hoping for favorable policies from Washington, including for EVs and self-driving cars.

• But if Musk falls out of favor on Capitol Hill, congressional Republicans will have little political reason to hold back on their war on EVs.
• In fact, the "big, beautiful bill" already contains language that would effectively end EV incentives for Tesla buyers, though Musk has previously said that he supports an end to those credits.

Threat level: While Tesla has experienced a decline in sales as progressive opponents protested Musk's support for Trump, the company was enjoying an increasingly positive reputation among more conservative consumers.

• Trump himself even promoted Teslas by promising to buy one in support of Musk earlier this year.

By the numbers: It's bad timing for EVs, which are already facing reputational issues.

• Only 16% of U.S. adults said it's likely or very likely that their next vehicle will be an EV, according to a AAA survey released Tuesday.
• That's the lowest point since 2019.

Reality check: If Musk becomes less associated with one particular party, that could be a positive in the long run.

• "We think a move back towards the middle would be a good thing for sentiment towards the stock," CFRA Research analyst Garrett Nelson tells Axios in an email.

The bottom line: "Consumers' disinterest in much-vaunted EVs and growing policy uncertainty" is likely poised to force automakers to focus on gas vehicles and hybrids, Bank of America analyst John Murphy writes in an industry report.