California is preparing to shield its status as the nation’s leader in electric vehicle (EV) adoption. Governor Gavin Newsom has unveiled a proposal to reinstate state-level EV rebates if the incoming administration under President-elect Donald Trump repeals the $7,500 federal tax credit.
However, the proposed program notably excludes Tesla, a move reportedly aimed at fostering competition among automakers.
The federal EV tax credit, introduced under the Biden administration’s Inflation Reduction Act, has been instrumental in driving EV adoption across the US. Trump, who has been a vocal critic of the program, has signaled plans to dismantle it after taking office. Newsom’s proposal seeks to preemptively mitigate the impact of such a repeal by reviving a version of the state’s Clean Vehicle Rebate Program (CVRP), which was phased out in 2023 but had provided incentives of up to $7,500 for over a decade. (via Bloomberg)
While the reinstatement of a state rebate would be welcomed by many, Tesla would not benefit under the current proposal. Newsom’s office has indicated that market-share limitations would exclude Tesla’s popular models.
The rationale, according to the governor’s office, is to “create market conditions for more automakers to establish themselves,” thereby diversifying the EV market and encouraging innovation from other players.
The exclusion of Tesla has sparked debate, especially given the company’s significant contributions to the EV industry, and its significant manufacturing and business presence in California. Elon Musk, has had a historically strained relationship with California policymakers, stemming from disputes over COVID-19 restrictions at Tesla’s Fremont factory and the company’s subsequent decision to relocate its headquarters to Texas. Despite these tensions, Tesla’s engineering headquarters remains in Palo Alto, and the company continues to ramp up production in the state at its Fremont factory.
Critics of the proposal argue that excluding Tesla could hinder overall EV adoption by limiting incentives for the best-selling models. Supporters, however, contend that the move could level the playing field for smaller automakers and accelerate the growth of a competitive EV market.
Funding for the proposed rebate program would come from California’s Greenhouse Gas Reduction Fund, which is financed through the state’s cap-and-trade program. Details regarding eligibility criteria, rebate amounts, and implementation timelines remain under negotiation with the state legislature.
