Newsom's proposed EV rebate under fire, as Tesla may not qualify

OAKLAND, Calif. - Governor Gavin Newsom is promising to continue the electric vehicle rebate program in California, but his new proposal could exclude Tesla through a market share cap.

This would all happen if the upcoming Trump administration cuts federal funding for EVs.

Right now, folks who buy an EV can receive a federal tax credit of up to $7,500, but President-Elect Donald Trump has threatened to end federal funding, despite his close relationship with Tesla maker Elon Musk.

Governor Gavin Newsom proposed a revival of the state’s "Clean Vehicle Rebate Program" to replace the federal funds in jeopardy. 

In a statement on Monday, Governor Newsom said, "We will intervene if the Trump administration eliminates the federal tax credit, doubling down on our commitment to clean air and green jobs in California."

The governor’s office said the proposal includes a state-funded rebate and a potential market cap to encourage competition. 

The market cap could exclude companies whose sales account for a certain number of total EV sales. The office did not confirm what the market share limit would be.

Newsom said there are more than 100 different EV models out there, but it’s no secret Tesla dominates the market.

Even with sales declining, according to the California New Car Dealers Association, Tesla accounts for more than half of all EV sales in the state.

If the proposal goes through, Professor and Director of the EV Research Center at UC Davis Gil Tal said Tesla sales could keep dropping.

"In general, Tesla’s market share is only going to shrink. Not because Tesla is not doing good, but because the other car company will have to sell more electric cars in coming years," Tal said.

Elon Musk called the proposal "insane" in a post on his platform X on Monday, writing, "…Tesla is the only company who manufactures their EVs in California!"

Congressman Ro Khanna also reacted on X Monday evening, "Tesla makes over 550,000 vehicles in Fremont in my district & employs over 20,000. Let's not play politics with keeping manufacturing in California. It would be foolish to exclude Tesla."

As Musk and Trump strengthen their relationship, the question of whether the president-elect’s cancelation of federal support for EVs could hurt Tesla is still up in the air. 

"I don't think that it will have zero impact, but I don't think that it will make or break Tesla sales in California or anywhere else," Tal said.

In the meantime, CEO of California-based solar electric vehicle maker Aptera Steve Fambro said they’re on board for Newsom’s proposed plan.

"Startups like Aptera, and many others operating out of California, could certainly use any competitive advantage we can get," Fambro said.

Newsom’s office said the proposal does not targeting any specific companies. The market cap would apply to all EV makers.

The proposal is subject to negotiation and approval by the California Air Resources Board, and this would only happen if the Trump administration stopped federal funds when the president-elect takes office.

This story was reported from Oakland, Calif.