The electric carmaker's stock fell as much as 7% on Monday after Elon Musk announced that he would set up a new political party.

Mr. Musk’s involvement in politics and his financial support for the president’s campaign was once seen by investors as a benefit to Tesla, fueling a steep rise in company shares after the election last year. That association has now turned into a liability. Tesla shares are down 40 percent from their peak in December.

Tesla shares fell on Monday after the electric-car maker’s chief executive Elon Musk said he would form a new political party, escalating a feud with US President Donald Trump.