US President Donald Trump has hit out at former close ally Elon Musk over the multi-billionaire's plan to launch a new political party.

"I think it's ridiculous to start a third party," said Trump, speaking to reporters on Sunday before boarding Air Force One. "It's always been a two-party system and I think starting a third party just adds to the confusion."

After teasing the idea for weeks, Musk posted on X over the weekend that he had set up the America Party to challenge the Republican and Democratic "Uniparty".

Trump and Musk were formerly close allies, with the Tesla boss leading the Department of Government Efficiency (Doge), which is tasked with helping to cut federal spending.

Musk has repeatedly criticised government policies that increase the US national debt.

On Sunday, he said that while the new party may back a presidential candidate at some point "the focus for the next 12 months is on the House and the Senate."

Trump also posted on his Truth Social platform on Sunday: "I am saddened to watch Elon Musk go completely 'off the rails,' essentially becoming a train wreck over the past five weeks."

The post took aim at Musk's push for an "Electric Vehicle (EV) Mandate", saying it would have "forced everyone to buy an electric car in a short period of time."

The president's tax and spending plan, which he signed into law on 4 July, ended tax breaks for electric vehicles.

He added that he had opposed Musk's proposal for an EV mandate from the beginning, explaining the reasons for omitting such vehicles in the legislation.

"People are now allowed to buy whatever they want - Gasoline Powered, Hybrids (which are doing very well), or New Technologies as they come about - No more EV Mandate."

The legislation includes increased spending for border security, defence and energy production, offset by controversial cuts to healthcare and food-support programmes.

Musk floated the idea of a new political party online during his public spat with Trump as he repeatedly criticised his spending plans.