California may exclude Tesla from EV rebate program

California Gov. Gavin Newsom may exclude Tesla and other automakers from an electric vehicle (EV) rebate program if the incoming Trump administration scraps a federal tax credit for electric car purchases.

Newsom proposed creating a new version of the state’s Clean Vehicle Rebate Program, which was phased out in 2023 after funding more than 594,000 vehicles and saving more than 456 million gallons of fuel, the governor’s office said in a news release on Monday.

“Consumers continue to prove the skeptics wrong – zero-emission vehicles are here to stay,” Newsom said in a statement. “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.”

The proposed rebates would be funded with money from the state’s Greenhouse Gas Reduction Fund, which is funded by polluters under the state’s cap-and-trade program, the governor’s office said. Officials did not say how much the program would cost or save consumers.

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They would also include changes to promote innovation and competition in the zero-emission vehicles market – changes that could prevent automakers like Tesla from qualifying for the rebates.

Tesla CEO Elon Musk, who relocated Tesla’s corporate headquarters from California to Texas in 2021, responded to the possibility of having Tesla EVs left out of the program.

“Even though Tesla is the only company who manufactures their EVs in California! This is insane,” Musk wrote on X, which he also owns.

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Those buying or leasing Tesla vehicles accounted for about 42% of the state’s rebates, The Associated Press reported, citing data from the California Air Resources Board.

Newsom’s office told Fox Business Digital that the proposal is intended to foster market competition, and any potential market cap is subject to negotiation with the state Legislature. 

“Under a potential market cap, and depending on what the cap is, there’s a possibility that Tesla and other automakers could be excluded,” the governor’s office said. “But that’s again subject to negotiations with the legislature.”

Newsom’s office noted that such market caps have been part of rebate programs since George W. Bush’s administration in 2005.

Federal tax credits for EVs are currently worth up to $7,500 for new zero-emission vehicles. President-elect Trump has previously vowed to end the credit.

California has surpassed 2 million zero-emission vehicles sold, according to the governor’s office. The state, however, could face a $2 billion budget deficit next year, Reuters reported, citing a non-partisan legislative estimate released last week.