Elon Musk, the world’s wealthiest individual and a significant political donor in America, has publicly announced the formation of a new political entity, the ‘America Party.’ This decision follows a period of increasing public disagreement between Musk and President Donald Trump, culminating in Musk’s Saturday announcement via his social media platform X. He articulated his belief that the prevailing political system has failed American voters, stating, “When it comes to bankrupting our country with waste & graft, we live in a one-party system, not a democracy. Today, the America Party is formed to give you back your freedom.” While Musk indicated the party's participation in elections ‘next year,’ he had not filed the necessary paperwork with the Federal Election Commission by Saturday evening.

This venture marks a considerable shift for Musk, who previously maintained a close alliance with President Trump. His frustration appears to stem from his tenure leading the Department of Government Efficiency (DOGE), where he aimed to curtail government programs and spending. The breaking point arrived with President Trump’s sweeping domestic policy bill, which Musk vehemently criticized last month as a “disgusting abomination,” arguing it would “massively increase the already gigantic budget deficit” and push America towards bankruptcy. For weeks, Musk had hinted at the possibility of launching a new party if the legislation passed, making Saturday the explicit confirmation of his intentions.

The creation of a successful third-party movement in American politics faces formidable challenges, primarily due to the entrenched two-party system that has dominated for generations. Past attempts by numerous billionaires and moderate figures have largely failed, encountering obstacles such as heavily gerrymandered districts favoring established parties, deep political polarization hindering middle-ground positions, and complex, expensive state laws for ballot qualification, which could even strain someone with Musk's vast resources. Despite his wealth and influence, Musk’s political track record shows mixed results; for instance, he failed to secure a Wisconsin Supreme Court seat for Republicans despite a $20 million investment.

Musk outlined a more modest initial strategy for the America Party, suggesting a focus on select races rather than an immediate nationwide launch. He proposed backing America Party candidates in just two or three Senate races and between eight and ten congressional races in next year’s midterm elections. He believes such a strategic focus could “serve as the deciding vote on contentious laws, ensuring that they serve the true will of the people,” given the “razor-thin legislative margins.”

Musk’s announcement immediately drew sharp criticism, particularly from within the Republican Party and the business community. Treasury Secretary Scott Bessent, speaking on CNN, suggested that the boards of directors at Musk’s companies, Tesla and SpaceX, would likely prefer him to concentrate on his business responsibilities rather than political activities. Investment firm Azoria Partners, which had been set to launch a Tesla-focused exchange-traded fund (ETF) that week, announced its postponement. James Fishback, CEO of Azoria Partners and a former DOGE advisor, criticized Musk for “undermining Tesla” and creating a “conflict with his full-time responsibilities as CEO,” adding that Musk had “gone too far” and urging Tesla’s board to evaluate the compatibility of Musk's political ambitions with his duties.

President Trump responded to Musk’s move by calling it “ridiculous” and stating that Musk had gone “completely off the rails,” likening him to a “TRAIN WRECK.” Trump reiterated his stance that third parties have historically failed in the U.S. and even threatened to revoke billions of dollars in government contracts and subsidies that Tesla and SpaceX receive, attributing Musk’s discontent to the removal of green-energy credits for Tesla’s electric vehicles in the new bill. The Democratic Party, in contrast, appeared to welcome the rift between Trump and Musk, viewing it as a sign of division within the Republican ranks.

The financial markets reacted swiftly and negatively to Musk’s political pivot. Tesla stock plunged nearly 8% on July 7, wiping out over $1.4 billion from its market value in a single day, and taking approximately $71 billion off its market value since earlier declines. This extended Tesla’s sharp decline to 35% from its December 2024 peak of over $488, closing last week at $315.35. Investors expressed significant unease, viewing Musk’s political focus as a major distraction from Tesla’s core business, especially following two consecutive quarters of missed delivery targets and increasing competition, particularly in China. Analysts like Dan Ives of Wedbush Securities noted a “sense of exhaustion” among investors, emphasizing that Tesla is “too important to be a sideshow.” While Tesla’s fundamentals and cutting-edge technology remain strong, the uncertainty surrounding subsidies, deliveries, and Musk’s political future is expected to continue pressuring the stock, with investors closely watching the upcoming Q2 earnings report on July 23.