Tesla (TSLA) could be excluded from California’s new electric vehicle (EV) tax credits if President-elect Donald Trump scraps the federal $7,500 EV tax credit, Governor Gavin Newsom's office said on Monday. This exclusion comes despite Tesla’s continued EV manufacturing operations in California. Shares of Tesla dropped 4% following the announcement, as CEO Elon Musk criticized the proposal on social media, calling it “insane” given Tesla’s significant presence in the state.
Newsom’s office is preparing a revamped state-level Clean Vehicle Rebate Program that could replace the federal credit if it is eliminated. The proposal, funded by California’s Greenhouse Gas Reduction Fund, aims to encourage innovation and support new market entrants while fostering competition. Tesla, which moved its headquarters from California to Texas in 2021, has frequently clashed with California policymakers, including over pandemic-related factory shutdowns and other regulatory issues.
Market Overview:- Tesla shares fell 4% as California considers excluding the company from new EV tax credits.
- Trump’s transition team may eliminate the federal $7,500 EV tax credit.
- California’s potential rebate program aims to foster market competition and innovation.
- Musk criticizes the exclusion, highlighting Tesla’s EV manufacturing in California.
- California has surpassed 2 million zero-emission vehicle sales as of 2023.
- The state plans to ban gasoline-only vehicle sales by 2035 under EPA-reviewed rules.
- The exclusion of Tesla could shape future competition and policies in California’s EV market.
- Discussions between Newsom’s office and the legislature will finalize the new rebate program.
- Federal decisions on the EV tax credit could have widespread implications for the sector.
California’s potential exclusion of Tesla from state EV tax credits underscores tensions between Musk’s company and state policymakers. While Tesla remains a dominant player in the EV market, its move to Texas and ongoing regulatory disputes highlight the shifting dynamics of its relationship with California. The proposal could encourage competition but raises questions about the fairness of excluding a major EV manufacturer.
As California continues to lead in zero-emission vehicle adoption, its policies will likely set a benchmark for other states. With federal and state-level decisions on EV incentives looming, Tesla and its competitors face a rapidly evolving regulatory landscape that could reshape the future of the industry.
