Gov. Gavin Newsom is preparing to offer California residents a $7,500 tax incentive for purchasing an electric vehicle if the Trump administration eliminates the federal tax credit. However, there’s a significant difference between the two programs.
Under Newsom’s proposed incentive, Tesla buyers in California would not qualify for the $7,500 tax break. That decision could potentially direct business away from Tesla to competitors.
The exclusion of Tesla from the rebate program is due to a proposed market-share cap aimed at promoting competition within the EV market. Tesla currently accounts for more than half of all new electric vehicles sold in California.
The governor’s office confirmed to Bloomberg that the terms of the tax incentive could change. It said the current proposal includes “market-share limitations” that would exclude Tesla’s popular models. The office also told Reuters that the rebate would “foster market competition” and “support new market entrants.”
Tesla CEO Elon Musk responded to the news on X, writing, “Even though Tesla is the only company who manufactures their EVs in California! This is insane.”
Trump’s transition team has shown interest in eliminating the federal EV tax credit. It would be part of a broader tax-reform package that Congress would vote on, according to Reuters, which spoke with two people familiar with the discussions.
California’s EV incentive program is not new. The state had its own version before the Biden administration enacted the federal tax credit. Newsom’s proposal to revive the state’s EV tax incentive would only progress if the Trump administration ended the federal subsidy.
