Elon Musk's Tesla might find itself on the sidelines when it comes to lucrative tax rebates in California. The Democratic governor, Gavin Newsom, has proposed measures that could potentially exclude larger companies like Tesla. These proposals are part of Newsom's broader strategy to shield California from the potential rollback of green subsidies by President-elect Donald Trump. If Trump follows through on his pledge to eliminate the federal EV tax credit, which can be worth up to $7,500 for purchased or leased vehicles, California is ready to set up its own scheme. As Newsom said, "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's spokesperson revealed that the proposals would include a "market cap" element. This could potentially exclude Tesla, despite the fact that Tesla is the only company manufacturing its EVs in California. Musk took to his social media platform X to express his disbelief, writing "Even though Tesla is the only company who manufactures their EVs in California! This is insane."
Newsom and Musk have had their fair share of conflicts on X. In July, the world's richest man vowed to relocate two of his companies, SpaceX and X, from California to Texas in response to a law that prohibits school districts in the state from notifying parents about a child's gender identification change. In 2021, Musk had already moved Tesla's headquarters out of California to Austin, Texas, citing frustrations with California's Covid-19 policies and high housing costs as reasons for the move.
Despite these past disputes, Tesla remains a significant player in California. The Tesla Model Y holds the top spot as the best-selling vehicle in the state, with 105,693 registered in the first nine months of 2024 and a 11% market share. The Toyota RAV4 comes in second with 49,810 sales. Tesla's Model 3 sedan is also a popular choice, being the second-best selling electric or hybrid vehicle after the Model Y. However, this year, Tesla's sales in California have fallen by almost 13%, despite a slight increase in total EV sales. This has led to a decrease in Tesla's market share from 63% in 2023 to 55%.
Dealers suggest that Musk's increasingly outspoken and divisive political views on social media have had an impact on demand in the predominantly liberal state. Combined with his support for Trump in the election, it seems to have affected Tesla's sales.
Tesla shares took a hit on Monday, falling by 4%. However, since Trump's re-election on November 5, Tesla's shares have still surged by about 40%. This shows the complex relationship between Tesla and the political landscape.
As we continue to monitor these developments, it's clear that the intersection of climate change, business, markets, and politics is a crucial area to keep an eye on. Stay tuned for more updates from the FT's Climate Capital section.