California proposes its own EV-buyer credit — which could cut out Elon Musk’s Tesla
Gov. Gavin Newsom’s proposal for an EV-buyer credit would exclude Elon Musk’s Tesla models.
Gov. Gavin Newsom of California is preparing to step in if Donald Trump fulfills his promise to ax the federal electric-vehicle tax credit — but one notable EV maker could be left out.
Newsom said Monday that if the $7,500 federal tax credit was eliminated, he would restart the state’s rebate program for zero-emission vehicles, which was phased out in 2023.
“We will intervene if the Trump Administration eliminates the federal tax credit, doubling down on our commitment to clean air and green jobs in California,” Newsom said in a statement. “We’re not turning back on a clean transportation future — we’re going to make it more affordable for people to drive vehicles that don’t pollute.”
The rebates for EV buyers would come from the state’s Greenhouse Gas Reduction Fund, which is financed by polluters of greenhouse gases under a cap-and-trade program, according to the governor’s office.
But Tesla’s vehicles could be excluded under the proposal’s market-share limitations, Bloomberg News first reported.
The governor’s office confirmed to B-17 that the rebate program could include a market-share cap, which could exclude Tesla or other EV makers. The office did not share details about what market-share limit could be proposed and said the proposal would be subject to negotiations in the California Legislature.
A market-share cap would exclude companies whose sales account for a certain number of total electric-vehicle sales. For instance, Tesla accounted for nearly 55% of all new electric vehicles registered in California in the first three quarters of 2024, a report from the California New Car Dealers Association said. By comparison, the companies with the next-highest EV market share in California were Hyundai and BMW, with 5.6% and 5%, respectively.
Tesla sales in California, the US’s largest EV market, have recently declined even as overall sales in the state have grown. Though the company still accounted for a majority of EV sales in California this year as of September, its market share fell year over year from 64% to 55%.
The governor’s office said the market-share cap would be aimed at promoting competition and innovation in the industry.
Elon Musk, who has expressed support for ending the federal tax credit, said in an X post it was “insane” for the California proposal exclude Tesla.
The federal electric-vehicle tax credit, which was passed as part of the Biden administration’s Inflation Reduction Act in 2022, provides a $7,500 tax credit to some EV buyers.
Musk, who is working closely with the incoming Trump administration, has expressed support for ending the tax credit. He’s set to co-lead an advisory commission, the Department of Government Efficiency, which aims to slash federal spending.
The Tesla CEO said on an earnings call in July that ending the federal tax credit might benefit the company.
“I think it would be devastating for our competitors and for Tesla slightly,” Musk said. “But long term probably actually helps Tesla, would be my guess.”
B-17 previously reported that ending the tax credit could help Tesla maintain its strong standing in the EV market by slowing competitors’ growth.
Before the EV-rebate proposal, Newsom had positioned himself as an opponent to the incoming Trump administration. Following Trump’s election win, the governor called on California lawmakers to convene for a special session to discuss protecting the state from Trump’s second term.
Dan Ives, an analyst at Wedbush Securities, said the move could incite a “Game of Thrones”-style battle between Newsom and Musk, which might persuade Tesla to move even more jobs out of the state.
