Tesla Inc. (TSLA  ) is back in the headlines, this time with a volatile combination of sagging fundamentals and political drama fueling the narrative. The electric vehicle behemoth delivered a dismal year-over-year delivery decline in company history days before CEO Elon Musk took to social media platform X to announce the creation of a new political party- the America Party.

The twin developments have unsettled investors and is looming like a dark cloud over a series of ETFs with significant Tesla holdings. Some ETFs are tracking Tesla's fortunes directly; others are pegged to the broader consumer or electric car industries. A closer examination of the most vulnerable ETFs follows, along with how they're responding:

ETF Exposure: Who's Feeling The Musk Effect Most?

Simplify Volt TSLA Revolution ETF (TESL  )

  • Tesla Weighting: ~50%
  • Characteristic: Extremely volatile; mirrors TSLA's fluctuations
TESL is a high-conviction Tesla-targeted ETF, designed to surf, or withstand, the Tesla tsunami. It feeds on Tesla's innovation story, with autonomy and AI. But in 2025, that trust is being challenged. Amid delivery downtrends and political curveballs, the fund has been finding it difficult to gain traction.

The stock crashed more than 7% today morning.

Consumer Discretionary Select Sector SPDR Fund (XLY  )

  • Tesla Weighting: ~16% (second-largest position behind Amazon (AMZN  ))
  • Characteristic: Deteriorating in recent weeks
As Tesla marches, so does XLY, at least to some degree. The ETF's emphasis on large U.S. consumer discretionary players makes it vulnerable to Tesla's performance, particularly considering the carmaker's size in the index. Weak deliveries are a structural blow, and Musk's volatile behavior introduces narrative risk.

The stock is down more than 1.1% in the early hours of regular trading today.

Vanguard Consumer Discretionary ETF (VCR  )

  • Tesla Weighting: between 12-16%
  • Characteristic: Slightly in the red after paring April's losses
VCR gives wider exposure through the consumer discretionary universe but is still top-heavy in Tesla. It is less sensitive than TESL or XLY but still susceptible to any persistent underperformance in the EV sector or changes in consumer demand sentiment.

The stock is down 1.2% in the morning trading hours today.

Tesla's Sharp YoY Global Vehicle Delivery Decline

Tesla sold 384,122 vehicles in Q2 2025, 13.5% lower than a year ago and less than the 387,000 expected by analysts, according to FactSet. Production was also lower, at 410,244 vehicles for the quarter. The decrease was strongest in the Model 3/Y platform, indicating loss of traction in Tesla's mainstay products.

With Chinese electric vehicle manufacturers launching competitively priced, regularly updated models, Tesla is now confronted with a tougher global EV battlefield. Its image is also taking a beating in the midst of CEO Musk's divisive public image and political activism.

Robotaxi: Hope On The Horizon Or Just Hype?

One silver lining: Tesla's much-hyped robotaxi fleet is finally on the road in Austin, Texas. A small number of autonomous Model Y vehicles are currently running, with more extensive rollouts planned later this year.

Nonetheless, investors are split. Regulation obstacles, safety doubts, and technical implementation issues may hold back the rollout. For Tesla-biased ETFs, the robotaxi play is a high-risk, high-reward swing.

Musk's Political Pivot: A New Party, A New Problem

As if it wasn't complicated enough to navigate the EV space, Musk has ventured into American politics. The America Party, which was announced on X following a poll of his followers, is positioned as an anti-establishment option. But the political foray has spooked Tesla observers and ETF issuers alike.

Case in point: the Azoria Tesla Convexity ETF, which was supposed to debut with a strategy targeting Tesla stock and options, has been put on hold indefinitely. Azoria CEO James Fishback pointed to Musk's political distraction and incendiary timing as top red flags for institutional investors.

Tesla stock fell more than 7% today morning, as Wall Street is attempting to determine how Musk's political aspirations will impact his day job(s).