California Gov. Gavin Newsom announced Monday that, if Donald Trump fulfills his pledge to end the federal $7,500 electric vehicle tax credit, his state will implement a rebate for electric car purchases to take its place.
The catch: The proposed rebate could be designed to leave out Tesla, which is run by Elon Musk.
“This is insane,” tweeted the MAGA billionaire and Trump ally, who has called for an end to all government subsidies, following the announcement.
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Musk is co-leading Trump’s Department of Government Efficiency commission, which will propose ways to cut federal spending by as much as $2 trillion.
“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,” Newsom said in a statement.
The governor’s office told Bloomberg News that the proposal contains a cap on market share that would make Tesla models ineligible for the rebate. They did not specify what the exact market share limitation would be.
Tesla accounted for roughly 55 percent off new electric vehicles registered in California in the first nine months of 2024, according to the California New Car Dealers Association. The second and third highest market share belonged to Hyundai and BMW with 5.6 percent and 5 percent, respectively.
In order to eliminate the existing federal tax credit, Trump would need Congress to amend the Inflation Reduction Act—which includes the credit—or pass a separate bill to eliminate it.
Musk said earlier this year that eliminating the federal tax credit would ultimately benefit his company and hurt competitors that are still scaling up their EV operations, such as Detroit’s big three automakers Ford, GM, and Stellantis.
“It would be devastating for our competitors, and it would hurt Tesla slightly, but long term it probably actually helps Tesla,” he said on the company’s second quarter earnings call.
California, meanwhile, has the most electric vehicles in America, accounting for 37 percent of registered light duty EVs on the road, according to the U.S. Energy Information Administration. If Trump repeals the federal tax credit, a rebate in California would therefore provide a major buttress for manufacturers.
Newsom, who is widely believed to be eyeing a presidential run in 2028, has taken steps to position himself as a blue state foil to Trump and his MAGA allies.
He called a special session of the state legislature for next week that will greenlight new funding for the California Department of Justice and other state agencies to challenge policies by the incoming Trump administration.
He’s also in the middle of an ongoing tour of counties that vote or lean Republican.
