Tesla CEO Elon Musk has once again found himself at the center of political debate, this time suggesting that the United States should exit the North Atlantic Treaty Organization (NATO). His remarks, made via a tweet stating, “We really should. Doesn’t make sense for America to pay for the defense of Europe,” have added another layer of complexity for Tesla investors already navigating the EV maker’s turbulent stock performance.
Musk’s Comments and the NATO Debate
NATO, founded in 1949 to provide collective security against the former Soviet Union, has long been a cornerstone of Western defense strategy. The alliance’s budget currently stands at approximately $5 billion annually, with the U.S. contributing just under $800 million—roughly equivalent to what the Department of Defense spends in eight hours. However, the broader debate revolves around overall defense spending, with the U.S. allocating nearly $1 trillion annually, or around 3% of its GDP, compared to Europe’s collective $300 billion, nearing the 2% NATO commitment.
Musk’s stance aligns with ongoing concerns among certain political factions regarding America’s disproportionate defense spending relative to its allies. However, his high-profile involvement in such geopolitical debates raises concerns about its potential impact on Tesla’s brand and stock performance.
Tesla’s Struggles and Investor Reactions
Tesla’s stock has seen a sharp decline, down approximately 38% since the Jan. 20 presidential inauguration and nearly 45% from its record highs in December 2024. Weak sales in both Europe and the U.S. have amplified fears that Musk’s increasingly vocal political stances may be alienating Tesla’s traditional customer base—progressive, environmentally conscious buyers who have historically leaned Democratic.
This shift in sentiment is evident in anecdotal reports from consumers. “My wife is insisting that we sell the Tesla… It’s the best car I’ve ever owned,” said Arjun Divecha, director at GMO. “If you live in Berkeley, California, you cannot afford to have a Tesla anymore. I’m not kidding you.”
Broader Market Impact
The uncertainty surrounding U.S. foreign policy and defense commitments under the current administration has rippled beyond Tesla. Major American defense contractors, including General Dynamics, Lockheed Martin, L3Harris Technologies, and Northrop Grumman, have collectively lost approximately $37 billion in market value since the Nov. 5 election, according to FactSet. Meanwhile, European defense firms such as BAE Systems (UK), Rheinmetall (Germany), Leonardo (Italy), and Thales (France) have gained a combined $70 billion in market capitalization.
Analyst Perspectives
Despite the controversy, some analysts remain optimistic about Tesla’s long-term prospects. Wedbush’s Dan Ives, a long-time Tesla bull, maintains a “Buy” rating on the stock with a price target of $550. He argues that investors should focus on Tesla’s fundamental business performance rather than Musk’s political engagements.
However, with Tesla’s European sales already tumbling 45% year-over-year in January—while competitors saw a 37% rise—the question remains whether Musk’s political rhetoric will further impact the company’s brand and financial standing.
As Tesla shareholders and industry analysts monitor the fallout from Musk’s latest statements, the broader implications of his political activism on Tesla’s stock and brand loyalty remain a developing story.
