Mr. Musk’s involvement in politics and his financial support for the president’s campaign were 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.

The Tesla CEO says both parties have failed and claims The American Party will fight government bloat, attract disillusioned Democrats, and shake up the system.