Gavin Newsom's Proposed California EV Credit Would Exclude Elon Musk's Tesla

A proposal by California Gov. Gavin Newsom (D) to offer rebates to electric vehicle buyers if President Donald Trump repeals federal subsidies on EVs would exclude Elon Musk’s Tesla from the program.

Bloomberg reports that in a move that could escalate tensions between California Gov. Gavin Newsom (D) and Elon Musk, Tesla’s electric vehicles would be shut out from consumer rebates under a new proposal unveiled by Newsom on Monday. The governor plans to offer rebates to EV buyers if US President-elect Donald Trump repeals a federal subsidy, potentially rebooting a program California phased out in 2023.

According to Newsom’s office, the current proposal includes market-share limitations that would exclude most or all of Tesla’s EV models. The details, including Tesla’s possible omission from the credits, will be negotiated with the state legislature and could change. The governor’s office stated that the move is “about creating the market conditions for more of these car makers to take root.”

Tesla CEO Elon Musk criticized the proposal on his X/Twitter platform, calling it “insane” and citing the automaker’s manufacturing presence in the state.

Excluding Tesla from the incentive program could be seen as a blow to the company, as it aims to spur wider adoption of EVs at a time of slowing growth for all-electric vehicles. Tesla’s models do qualify for the current federal credit, which was introduced as part of President Joe Biden’s Inflation Reduction Act.

The move could also bolster Newsom’s standing on the left as he renews his clash with Musk. Tensions between the two have been strained for years, with Musk moving Tesla’s headquarters to Texas in 2021, partly due to frustration with California’s politics. During the coronavirus pandemic, Musk had angrily denounced state orders to close Tesla’s Fremont factory, labeling them “fascist.”

While Tesla still accounts for more than half of all new EVs sold in California, its grip on the market is slipping. Tesla’s sales in the state fell 12.6 percent during the first three quarters compared with a year earlier, even as overall electric-vehicle sales in California rose one percent, according to the California New Car Dealers Association. Tesla made 54.5 percent of all EVs registered in the state during the first three quarters, a significant drop from 63 percento during the same period last year.

California has frequently clashed with Trump on auto emission regulations during the incoming president’s first term, and the state’s leaders are now preparing for another fight. Newsom has already sought to shield the state’s policies on issues including reproductive rights, climate, and immigration from potential threats under a Trump administration.

Trump has long criticized the Biden administration’s efforts to subsidize EVs to boost adoption of cleaner cars. His transition team is now looking to slash fuel-efficiency requirements for new cars and light trucks as part of plans to unwind Biden policies the president-elect has blasted as an “EV mandate.”

California, along with states like Oregon and Colorado, currently enjoys an exemption from rules that preempt them from enacting their own emissions standards for new vehicles. More than a dozen states representing over a third of the US auto market now formally follow California’s rules.

Trump targeted California’s right to set tougher gas mileage rules than the federal government during his first term and is expected to make another attempt to roll back the California carve out under the 1970 Clean Air Act after taking office in January.