<div id="readability-page-1">With shares down 21% year to date, Tesla (TSLA 0.04%) is reeling from a combination of weakening electric vehicle (EV) demand, political uncertainty, and a CEO who seems to have misplaced priorities. The next three years will be a make-or-break period for the company as it attempts to roll out its robotaxis across American cities, while dealing with the potential fallout of unfavorable Trump administration policies. Let's dig deeper to see how this story might play out for Tesla shareholders. <h2>Is Elon Musk propping up Tesla's valuation?</h2> It's impossible to analyze Tesla without considering its controversial CEO, Elon Musk, who plays a significant role in its stock's perception, even if he isn't necessarily involved with all its day-to-day decision-making. Love him or hate him, Musk is an incredibly skilled executive. He has a track record of involvement in successful companies ranging from PayPal to Starlink, and typically aims to tackle massive world-changing topics like clean energy, space travel, and brain implants. The market seems to appreciate Musk's bold risk-taking leadership style, which helps explain why Tesla still enjoys an incredibly high valuation, despite its increasingly lackluster fundamentals. With a price-to-earnings (P/E) multiple of 172, the stock trades at a substantial premium over the S&amp;P 500 average of 30 despite posting lackluster operating results. First-quarter revenue dropped 9% year over year to $19.3 million, while operating income collapsed by 66% to just $399 million. With these weak fundamentals, Tesla should probably be cheaper than it is, but the market still has faith in Musk. <h2>A political liability </h2> Over time, it is becoming clear that Tesla's &#34;Musk premium&#34; is eroding and may soon become a liability. The CEO's managerial skills have not translated to political acumen. In fact, his antics usually seem to minimize results while maximizing the potential for backlash. A great example of this is the flare-up over the &#34;One, Big, Beautiful Bill&#34; legislation, which passed the U.S. Senate on July 1 and is expected to become law later this month despite Musk's vocal opposition on social media. Now, Musk-affiliated companies must face a double whammy over the potential for political retaliation (this may come in the form of regulatory challenges) while also dealing with the contents of the bill itself. <div><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjM2NDcvZ2V0dHlpbWFnZXMtMTczMzIxMzEzOC0xLmpwZyZ3PTcwMA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="393" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjM2NDcvZ2V0dHlpbWFnZXMtMTczMzIxMzEzOC0xLmpwZyZ3PTcwMA"/>Image source: Getty Images. </div> The bill could be a crushing burden on a U.S. EV industry that is already struggling with consumer fatigue, high interest rates, and tariffs on imported components. Although the final version is yet to be approved, the Senate has agreed to eliminate the $7,500 tax credit on electric vehicle purchases, while also ending support for residential solar and rolling back vehicle emissions regulations on Tesla's gas-powered rivals. These headwinds come at a time when Tesla's overseas operations are struggling because of political backlash and new, low-cost rivals from China, which often enjoy open support from their government. <h2>What comes next for Tesla?</h2> The next three years will be incredibly challenging for Tesla as the impacts of the act could potentially weaken the market for its products in the U.S. Musk's political antics could make things worse by alienating some consumers and drawing potential political retaliation from President Donald Trump and his allies as it attempts to pioneer regulatorily-sensitive business ventures like artificial intelligence and self-driving cars. Historically, it hasn't been a good idea to bet against Musk because he usually proves his naysayers wrong. That said, these current challenges look daunting, even for him. And they could easily put pressure on Tesla's sky-high valuation. Investors may want to stay away from the stock until more information becomes available. </div>

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Tesla's stock has dropped 21% this year due to declining EV demand, political uncertainty, and CEO Elon Musk's controversial leadership. The next three years are critical as Tesla aims to launch robotaxis while facing potential regulatory challenges from the Trump administration. Despite a high valuation, the company's fundamentals are weakening, with a significant drop in revenue and operating income. Investors are advised to be cautious as Musk's political actions may further impact the company's market position and valuation.

- Tesla's shares have dropped 21% year to date due to declining EV demand, political uncertainty, and CEO Elon Musk's controversial leadership.  
- The company faces significant challenges in the next three years, particularly with the rollout of robotaxis and potential regulatory impacts from new legislation that could harm the U.S. EV market.  
- Despite Musk's historical success, current market conditions and political backlash may pressure Tesla's high valuation, leading investors to reconsider their positions.

Where Will Tesla Stock Be in 3 Years?