California Governor Gavin Newsom has unveiled intentions to reintroduce the state’s electric vehicle (EV) rebate program if the incoming Trump administration abolishes the federal $7,500 EV tax credit. This strategy would establish California as a support system for clean energy users, guaranteeing the affordability of zero-emission vehicles in the largest EV market in the country.
“We’re not reversing our commitment to a clean transportation future — we aim to make it more economical for individuals to operate vehicles that don’t produce pollution,” Newsom expressed in a statement.
The program will be financed through California’s Greenhouse Gas Reduction Fund, supported by polluters under the state’s cap-and-trade framework. Nonetheless, a contentious market-share limit in the proposal could potentially exclude Tesla, California’s leading EV manufacturer, from obtaining rebates.
Controversary over market-share cap
Tesla, which holds nearly 55% of the EV market in California, might be disqualified based on the proposed regulations designed to encourage competition within the industry. In contrast, Hyundai and BMW have much smaller market shares of 5.6% and 5%, respectively.
Although Newsom’s office has yet to finalize the market-share restrictions, the proposal has raised significant criticism from Tesla CEO Elon Musk, who has advocated for the repeal of the federal EV credit.
Musk characterized the exclusion as “insane” in a social media comment, heightening the tensions between the tech entrepreneur and the governor of California. Musk has previously been in favor of eliminating federal tax credits, arguing that it would create a more level national market, but this specific state approach has incited his frustration.
“Tesla is the only company producing their EVs in California,” Musk stated, implying that the company might consider relocating operations outside the state if its vehicles do not qualify for the rebate.
Political and economic ramifications
The proposed rebate initiative emerges during a politically turbulent time, with Newsom openly opposing Trump’s policies. The governor’s action could exacerbate the friction between Sacramento and Washington, D.C., and further strain relationships with Musk, who is co-leading an advisory commission for Trump that focuses on reducing federal spending.
Dan Ives, an analyst at Wedbush Securities, compared the escalating conflict to a “Game of Thrones”-like struggle for power. Ives remarked that the policy might prompt Tesla to move more jobs out of California, a state already contending with elevated corporate taxes and regulatory challenges.
As California’s legislative body deliberates the specifics of the initiative, the results could transform the state’s EV market landscape. Tesla’s market share, which has already declined from 64% to 55% over the past year, could encounter additional difficulties if the rebates draw consumers towards competitors.
Newsom’s proposal highlights a wider effort to align innovation with accessibility within the EV sector. Whether it accelerates California’s pursuit of clean energy or distances itself from its primary EV player remains uncertain.
For the moment, a divide is evident between Newsom’s progressive policies and Musk’s market-oriented perspective, setting the stage for an important confrontation regarding California’s sustainability journey.
California could provide rebates for electric vehicle purchases should the incoming Trump administration discontinue a federal tax credit for electric car buyers, Governor Gavin Newsom mentioned on Monday.
Newsom, a member of the Democratic Party, suggested the creation of a new iteration of the state’s Clean Vehicle Rebate Program, which was terminated in 2023 after subsidizing 594,000 vehicles and conserving 456 million gallons of fuel, according to Newsom’s office.
“Consumers continue to disprove the doubters – zero-emission vehicles are destined to remain,” Newsom asserted in a statement. “We’re not reversing our commitment to a clean transportation future — we’re going to make it more affordable for individuals to operate vehicles that don’t pollute.”
Newsom’s proposal forms part of his strategy to safeguard California’s progressive policies in anticipation of Republican President-elect Donald Trump’s second term. He urged a special session of the state Legislature to collaborate on “Trump-proofing” state legislation by increasing funding for the attorney general’s office to challenge federal legal issues.
However, a projected budget shortfall could hinder California’s resistance initiatives. Initial budget forecasts indicate that the state may encounter a $2 billion deficit next year, based on a report published last week by the nonpartisan Legislative Analyst’s Office. Although this represents an improvement from a projected $46.8 billion deficit faced the previous year, the shortfall could still limit the state’s capacity to develop new programs and oppose federal legal actions. Leaders in both legislative chambers have noted that the state must maintain prudence in light of possible future budget deficits.
Karoline Leavitt, a spokesperson for Trump’s transition team, stated that the president-elect intends to fulfill his campaign pledges, “including halting assaults on gas-powered automobiles.”
“When he assumes office, President Trump will advocate for the auto industry, allowing room for both gas-powered vehicles AND electric vehicles,” she stated in a comment.
Funding for the new rebate initiative may be sourced from the state’s Greenhouse Gas Reduction Fund, which receives money from polluters as part of the state’s cap-and-trade system, according to officials from the governor’s office.
Officials did not disclose the expected cost of the program or the specifics of how the rebates would function.
According to Newsom’s office, California has now sold over 2 million zero-emission vehicles. In recent years, the state has implemented policies aimed at moving away from vehicles powered by fossil fuels, including cars, trucks, trains, and lawn mowers.
Trump had previously promised to eliminate federal tax credits for electric vehicles, which can provide up to $7,500 for new zero-emission cars. There is also a $4,000 incentive available for used electric vehicles. However, Trump later adjusted his position after receiving support from Tesla CEO Elon Musk, who became an adviser.
According to the governor’s office, Newsom’s proposed rebates might exclude Tesla and other manufacturers to encourage greater competition and innovation in the market, but this is still up for discussion with the state Legislature.
Musk referred to Tesla’s potential exclusion as “insane” in a post on X. Data from the California Air Resources Board indicates that around 42% of rebates under the previous clean vehicle rebate program were allocated to buyers or leasers of Tesla vehicles.
Trump criticized Newsom on social media after Newsom called for a special session, highlighting the high living costs in California and the state’s homelessness issue. Trump remarked that Newsom was “stopping all of the GREAT things that can be done to ‘Make California Great Again.’”
Earlier this month, on his podcast, Newsom mentioned that he reached out to Trump post-election. He noted in a news conference last week that he still had not received a response from the president-elect.
California’s previous Clean Vehicle Rebate Program provided rebates for electric vehicles of up to $2,500.
California Governor Gavin Newsom is scheduled to meet with the Biden administration this week to discuss zero-emission vehicles and disaster relief—topics that have previously been addressed by President-elect Donald Trump.
The Democratic governor will depart for Washington on Monday and return on Wednesday, as stated by his office. Newsom will also engage with California’s congressional delegation.
He is requesting federal approval for state climate regulations, a $5.2 billion reimbursement for emergency COVID-19 funding, updates to the state’s Medicaid program, among other priorities.
This trip follows Newsom’s call for state legislators to hold a special session in December to safeguard California’s progressive policies ahead of Trump’s reinauguration in January.
In response, Trump criticized the governor on social media, emphasizing the high cost of living in California and the state’s homelessness crisis. He stated that Newsom was “stopping all of the GREAT things that can be done to ‘Make California Great Again.’”
According to Thad Kousser, a political science professor at the University of California San Diego, California triumphed over most legal challenges posed by the Trump administration concerning the state’s environmental and progressive policies during Trump’s initial term.
“The question is: Has Donald Trump altered the legal landscape so profoundly through his court appointments in his first term that he will be able to succeed with policies in his second term?” he remarked.
During his presidency, Trump appointed over 230 federal judges, including three justices to the U.S. Supreme Court.
In 2019, the Trump administration rescinded California’s capacity to enforce its own tailpipe emissions standards. However, President Joe Biden later reinstated the state’s authority, which was reaffirmed in federal court.
While the U.S. Environmental Protection Agency usually determines emissions standards for passenger cars, trucks, and other vehicles, California has historically been granted exemptions to impose its own stricter regulations.
There are eight climate regulations from California pending waivers from the EPA. These include initiatives mandating that all new vehicles sold in the state be zero-emission by 2035, moving away from diesel trains, and updating emission standards for pollutants from heavy-duty vehicles.
Gil Cisneros, who was elected to represent Los Angeles County in the U.S. House, stated in an email that his fellow Democrats have a duty to defend essential policies even with Republicans controlling the House.
“If Donald Trump follows through on pledges to eliminate the Affordable Care Act, implement mass deportations, and raise tariffs… it is our responsibility to communicate to the American public and convince them how his policies will adversely affect the economy and their finances,” Cisneros expressed. “That is how we will be more capable of resisting him.”
Democratic Sen.-elect Adam Schiff indicated in remarks to Fox 11 in Los Angeles that he was prepared to collaborate with Trump to reduce costs and strengthen the economy.
San Jose mayor against Newsom
If the federal tax credit comes to an end, potential EV purchasers in California may still receive reimbursements under Newsom’s plan. Nevertheless, it seems that EV leader Tesla is likely to be left out of that rebate.
The decision to exclude Tesla—a company that has achieved significant success in California—has created a divide between San Jose Mayor Matt Mahan and fellow Democrat Newsom. Mahan expressed on Tuesday that Newsom’s proposal lacks “economic justification,” claiming that the action is merely a “political stunt.”
“I strongly oppose the decision to leave Tesla out of the suggested program aimed at promoting EV adoption in California—we aim to encourage economies of scale to bring down the price of electric vehicles,” Mahan stated in a post on X. “Attempting to penalize (Tesla CEO) Elon Musk by omitting the top-selling EV, Tesla, from a program meant to boost EV adoption is devoid of economic rationale.”
Mahan expressed his hopes that other California leaders will intervene to make EVs more affordable across the state. The mayor of the largest city in the Bay Area further stated his desire for Tesla, which operates a facility in Fremont, to expand even further.
Ro Khanna shares Mahan’s perspective. The Democratic congressman remarked that “it would be illogical to exclude Tesla” in a widely shared post on X.
In 2023, the Tesla Model Y was the best-selling new vehicle in California by a significant margin, with the Tesla Model 3 ranking as the second best seller. Tesla represents more than half of the electric vehicle sales in the state.
Musk labeled the exclusion of his company as “insane,” responding on X to a headline from Bloomberg.
Some observers have suggested that Newsom’s choice is a political maneuver to hinder Tesla’s continued success—especially given Musk’s ties to Trump. Mahan and Khanna have accused their governor of engaging in political games.
Newsom Refutes Targeting Tesla
Newsom has denied that his proposal was aimed specifically at Tesla, according to the governor’s office relayed to KRON4.
The potential exclusion of Tesla is intended to provide other EV manufacturers a better opportunity to expand in California, as stated by Newsom’s office. The proposal suggests implementing a market cap—which would apply to all qualifying automakers—to encourage market competition.
The proposed market cap would not just impact Tesla but would be applicable to any electric vehicle manufacturer. Given that Tesla has the highest sales of any EV brand in the state, it will likely be affected the most.
Encouraging market competition has been a goal of numerous government rebate programs going back to the George W. Bush administration starting in 2005.
California previously had a Clean Vehicle Rebate Program, which offered EV buyers a rebate of up to $2,000 in addition to the $7,500 from the federal government. That program ended in 2023 when the state ran out of funds.
Additional California Leaders Respond
Despite Newsom’s insistence that Tesla is not being specifically targeted, other politicians perceive the governor’s proposal as an attack on Musk’s company.
California congressman Kevin Kiley (R) referred to the exclusion of Tesla as “petty.”
“This comes despite Tesla being the only car manufacturer producing vehicles in California and employing over 40,000 residents,” Kiley posted on X. “It is foolish, mean-spirited, corrupt, and counterproductive. Classic Newsom.”
Mahan and Khanna are advocates for Tesla’s prosperity as over 20,000 people work for the company, many of whom reside in the districts represented by the politicians.
“The (Tesla) facility employs over 20,000 individuals—many of whom are residents of San Jose. The average salary is around $100,000 annually. We aim to retain these high-quality jobs in California rather than drive them away with political stunts,” Mahan articulated.
