Tesla Inc (NASDAQ:TSLA) customers may not be able to receive tax credits from the state of California under a proposal by Donald Trump to end the federal support scheme for electric vehicles.
Shares in the EV manufacturer, whose Fremont factory in the state makes its Model S, Model X, Model 3 and Model Y cars, fell 4% on the news.
California governor Gavin Newsom said on Monday that he will propose creating a new version of the state’s clean vehicle rebate program if Trump gets rid of the federal EV tax credit when he returns to the White House in the new year.
But the proposal for zero-emissions vehicles rebates would likely be subject to a cap, which “would be intended to foster market competition, innovation and to support new market entrants," Newsom’s office said.
Tesla CEO Elon Musk, a key supporter of Trump’s election campaign, said in a tweet that: "Even though Tesla is the only company who manufactures their EVs in California! This is insane."
Musk, in a Tesla earnings call in July, expressed support for end tax credits for EVs, saying he thinks it “would be devastating for our competitors and for Tesla slightly... But long-term probably actually helps Tesla, would be my guess."
In a later post on X, the SpaceX boss said: "End all government subsidies, including those for EVs, oil and gas."
California’s clean vehicle rebate program, which ran until 2023, saw the state spend $1.5 billion to subsidize more than 594,000 EVs.
The state faces a $2 billion budget deficit next year, according to a legislative estimate earlier this month.
Tesla accounts for more than half of all new EVs sold in California, but its share is dropping, with 54.5% of all EVs registered in the state during the first three quarters, compared to 63% versus a year earlier.
The EV company moved its corporate headquarters from California to Texas in 2021 amid Musk's criticism of California's tax policies and regulation.
Tesla has received many millions in loans and tax incentives, as well as benefits from tax credits for customer purchases, including nearly $9 billion in regulatory credits over the years (of which $1.8 billion of carbon credit sales were generated last year), Nevada's $1.25 billion tax incentive package in 2014 and a $465 million loan under the Advanced Technology Vehicles Manufacturing (ATVM) program in 2010.
SpaceX has received over $15 billion in government awards since 2003, including crucial contracts in its early years.