In a crazy new plan from California Governor Gavin Newsom, he plans to provide electric vehicle tax credits to residents, while President Trump plans to eliminate both the order and the tax credits. The new rules would provide a $7,500 tax credit for all electric vehicles except Tesla. This is crazy because they are the only American car company making electric cars in the state.
Newsom appears to be pursuing a Democratic presidential bid in 2028, potentially against Republican ally and power figure Elon Musk. Musk cannot run for president but supports eliminating mandates and tax credits and has endorsed President Donald Trump.
Newsom unveiled plans to offer rebates to electric vehicle buyers if President-elect Trump repeals federal subsidies. The governor said a program that California phased out in 2023 may be restarted in place of the $7,500 tax credit. This is just a sign of superiority.
Newsom’s office told Bloomberg News that the current proposal includes market share limits that would exclude Tesla’s popular electric vehicle models. Details, including Tesla’s omission from credits, will be negotiated with state legislators and are subject to change. But it’s clear that the goal of the plan is to hurt Tesla.
Musk, Tesla’s billionaire CEO, called the proposal “crazy” in a post on X, noting that the automaker has manufacturing plants in the state.
The move would exclude market-leading Tesla from a key incentive program aimed at spurring wider adoption of electric vehicles at a time when growth in all-electric vehicles is slowing. Tesla models do qualify for the current federal credit, which was introduced as part of the Inflation Reduction Act, the climate bill signed by President Joe Biden.
Excluding Tesla could bolster Newsom’s standing on the left, as he would return to clashing with Musk. Musk has become a member of Trump’s inner circle and accepted a role in helping the incoming administration cut government spending. Musk said he agrees with eliminating federal subsidies.
Tensions between Musk and Newsom have been strained for years since Tesla leaders moved the automaker’s headquarters to Texas in 2021, in part due to dissatisfaction with California politics.
Musk angrily denounced government orders to close Tesla’s Fremont, Calif., factory during the Covid-19 pandemic, labeling it “fascist” during an earnings call. When Musk announced the headquarters move, Newsom said Tesla’s success was partly due to California.
Tesla still accounts for more than half of all new electric vehicles sold in California, but its grip on the market is slipping. According to the California New Car Dealers Association, Tesla’s sales in California fell 12.6% year-on-year in the first three quarters, although overall electric vehicle sales in the state increased by 1%. In the first three quarters, electric vehicles produced by Tesla accounted for 54.5% of the total number of registered electric vehicles in the state, a sharp decrease from 63% in the same period last year.
We will provide you with the latest information here as the new tax credit program is finalized.
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