Investor Ross Gerber Sees Musk-Trump Dispute as a Crisis Moment for Tesla

Elon Musk has once again criticized the Republican budget proposal, reigniting his feud with former President Donald Trump.

According to Ross Gerber, a veteran investor, this rekindled dispute is likely to exacerbate Tesla's existing challenges, especially after a weak report on vehicle deliveries for the past quarter.

Ross Gerber, CEO of Gerber-Kawasaki Wealth Management and an early Tesla investor, suspects that Musk's ongoing clash with Donald Trump casts a shadow over the electric vehicle manufacturer's future.

Financial Struggles and Investor Concerns

This year, Tesla's stock has already fallen by 22%. While Gerber views Musk's public disagreements as damaging, he also notes that the company's soaring valuation and operational uncertainties, including those around core vehicle sales and new ventures like robotaxis, are significant concerns.

Gerber predicts that if market reevaluations proceed, Tesla's stock value could diminish by half. On a recent Wednesday, Tesla shares were trading at approximately $316.

Speaking with Bloomberg, Gerber expressed widespread investor fatigue with the situation. He acknowledged tweeting his displeasure, describing the situation as a 'final blow' that painfully impacts Tesla. He labeled Musk's critiques of Trump on social platforms as 'ridiculous.'

Musk's revived confrontation with Trump over tax and budgetary decisions led to a more than 5% dip in Tesla shares following a proposal by Trump suggesting the reassessment of contracts with Musk's businesses.

Image and Market Dynamics

Gerber claims that Musk has damaged his public image significantly. 'One starts to wonder what his priorities are,' Gerber remarked. 'Instead of focusing on vehicle and robotaxi sales, he's embroiled in disputes with high-profile figures.' Referring to Musk's pivotal role in Trump's rise, Gerber added, 'But now, Trump’s influence clearly overshadows his.'

This negative press arrives as Tesla reports a 14% decrease in vehicle deliveries compared to the previous year's second quarter. A significant 45% decline in European Union sales from January to May exacerbates the problem, based on the European Automobile Manufacturers' Association's recent data.

The Economic Balancing Act

Tesla's recent price hikes, contributing to dwindling sales, are another sore point. Gerber indicates a 'significant' imbalance between supply and demand for Tesla vehicles.

He articulated a simple economic principle: 'Higher prices deter buyers. It's straightforward, and they're already facing challenges in selling.'

Highlighting Tesla's overvaluation, Gerber points out the firm's valuation stands at 150 times its earnings, placing it at three to four times the valuation of other large tech companies like Nvidia and Google.

Shifts in Investment Strategies

Gerber's investment fund has recently divested entirely from Tesla, although it maintains $60 million invested across client-managed accounts.

For over two years, the firm has been systematically reducing its Tesla holdings, following regulatory disclosures closely.

Despite these sales, Gerber retains a minor personal investment in Tesla, describing it as 'one of the best decisions' of his career.

Gerber questions the current valuation justified by Tesla’s ambitions in robotics and autonomous taxis, neither of which have become a reality. He anticipates a market correction sooner rather than later.