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Tesla has been grappling with significant challenges, and now, CEO Elon Musk's conflict with President Trump adds another layer of difficulty. Musk’s fallout with the president could jeopardize critical climate policies that bring substantial financial benefits to the electric carmaker.

The Republican domestic policy bill, endorsed by Trump, stands to dismantle several programs that currently boost Tesla’s profitability. As the largest electric vehicle manufacturer in the United States, Tesla depends heavily on subsidies and tax credits, which the new legislation plans to cut. Buyers of electric cars, currently entitled to tax credits up to $7,500, would see these incentives vanish. Additionally, the bill aims to phase out subsidies for battery production and lithium processing, alongside ending support for electric vehicle charging infrastructure.

The impact is already palpable. Following Trump and Musk’s public spat on social media, Tesla's stock suffered a dramatic 14% drop on Thursday, marking its steepest one-day decline. Although the stock recovered nearly 4% on Friday, the overall market sentiment remains precarious.

Crucially, Tesla’s profitability heavily relies on selling regulatory credits to automakers that fail to meet environmental standards. These credits accounted for $595 million in revenue for Tesla in the first quarter of the year, surpassing its net profit of $409 million. Without these credits, Tesla would be in the red.

Moreover, the partisan feud could impede Musk’s ambitions for Tesla's autonomous vehicles. The regulatory landscape for self-driving cars is intricate, and federal support is crucial for advancing these technologies. Tesla plans to roll out self-driving taxis in Austin, Texas, with Musk touting this venture as the company's future revenue driver.

Despite these challenges, some analysts believe there could be a silver lining if Musk withdraws from partisan politics, potentially mitigating the liberal backlash that has impacted Tesla’s sales in Europe and the United States. Though the Future Fund recently divested all its Tesla shares, arguing that the stock’s valuation is no longer justified by its fundamentals, other investors like Ben Rose of Battle Road Research foresee a more favorable outcome.

In the complex dance of policy, market forces, and corporate strategy, Elon Musk’s next steps will be critical for Tesla’s future. With cuts to federal subsidies looming and regulatory pressures mounting, the electric vehicle giant faces a rocky road ahead.