As Elon Musk prepares to wield more power in Washington, the state where he built his fortune is gearing up for battle.
Gavin Newsom is positioning California as a foil for Donald Trump's policies and laying the groundwork for resistance to the whole lot from deportations to regulatory rollbacks. On Monday, the Democratic governor unveiled a plan that directly affects Musk's Tesla Inc.: a rebate for electric vehicle buyers if the president-elect repeals a federal subsidy.
Notably, the proposal includes market share restrictions that might exclude popular Tesla models.
RELATED: Tesla excluded from electric vehicle buyer credits in Gov. Newsom's proposal
The expulsion marks one other turn within the strained relationship between Newsom and Musk, a key member of Trump's inner circle who was tapped to co-lead an initiative to chop federal spending. The governor's office said the policy is designed to permit more automakers to “kick the ball” — a blow to Tesla, an organization founded in Silicon Valley and supported by California's climate goals and incentives.
Musk has made no secret of his disdain for deep blue California and its politics. He moved Tesla's headquarters from Palo Alto to Austin in 2021 after clashing with Newsom over pandemic lockdowns.
In July, as his move into Republican politics deepened, he announced that his enterprise can be subject to changes to a student's gender identity.
But just last yr, Musk and Newsom struck a collaborative tone after they announced a Tesla global engineering headquarters in Palo Alto. The auto company also maintains a big presence with a factory in Fremont – some extent Musk emphasized in an X post on Monday, calling Newsom's policies “crazy.”
“Think of the relationship between Newsom and Musk as love-hate, love-hate, love-hate,” said Dan Schnur, a political analyst who teaches on the University of Southern California and the University of California at Berkeley. “The closer Musk gets to Trump, the more lucrative he becomes as a political target for Newsom.”
Newsom, who’s widely believed to have presidential ambitions, is compounding potential hurdles for the Trump administration. He called a special session of the Legislature next week to offer money to the state Justice Department to potentially sue the federal government or defend against federal lawsuits. He can also be traveling to Republican strongholds within the state to spread his economic message and reassure them that their concerns are being heard.
RELATED: The path for Gov. Gavin Newsom to run for president is evident, insiders say
In an announcement Monday, Newsom said California will “double down” on its commitment to scrub air and green jobs.
“We're not turning our backs on a clean transportation future, but rather making it more affordable for people to drive vehicles that don't pollute the environment,” he said.
Details of the EV proposal — including Tesla's possible omission from the credits — are being negotiated with the state legislature and will change, Newsom's office said. Leading lawmakers haven’t expressed support for the measure, especially as California faces difficult budget negotiations in the brand new yr.
“We will consider this proposal and all others as part of the larger budget negotiations,” the office of Senate President Pro Tempore Mike McGuire said in an announcement. A representative for state Assembly Speaker Robert Rivas didn’t reply to a request for comment.
Ro Khanna, a Democratic congressman whose district includes Fremont, said it might be “foolish” to exclude Tesla. He alluded to President Joe Biden's decision not to ask the corporate to a summit of electrical vehicle makers early in his term – a move that angered Musk and contributed to his contentious relationship with the federal government.
“Let’s not play politics by maintaining production in California,” Khanna said on X. “Did we learn nothing when we snubbed @elonmusk at the Biden EV summit?”
Dominant share
“If the goal is, 'Let's sell more electric vehicles,' that seems a little misdefined,” Caldwell said, citing Tesla's significant market share and name recognition. The company accounted for 54.5% of all electric vehicles registered within the state in the primary three quarters of this yr, in comparison with 63% in the identical period last yr. Hyundai Motor Co. is a distant second with a share of 5.6%.
Although its dominance has waned, Tesla still has enough market power in California and the US to mitigate the impact of buying subsidies on its business. Additionally, the corporate has generated an adjusted profit yearly since 2020, while the electrical vehicle businesses of rivals like Rivian Automotive Inc. and legacy automakers like Ford Motor Co. proceed to lose money.
As manufacturers bring increasingly more electric vehicles to market – including at lower prices – the market is beginning to confide in more buyers. California's potential move could break Tesla's long-standing stranglehold in the marketplace and toughen smaller players which have struggled to interrupt through.
Tesla's exclusion from the federal government loan can be a “net negative” for the corporate because it might put it at an obstacle in comparison with fossil fuel vehicles, Tom Narayan, an analyst at RBC Capital Markets, said in a note to clients.
“We wonder how the governor's office will justify such a policy,” he said, noting that the state has issued a directive requiring all recent vehicles to be zero-emission by 2035.
Gil Tal, director of the Electric Vehicle Research Center on the University of California, Davis, said Tesla has less need for buyer incentives than smaller automakers. However, he also said the corporate's exclusion was probably not mandatory to spur competition.
Schnur, the political consultant, said it was hard to not view Newsom's move as punitive.
“There is no evidence that the Newsom administration has punished major renewable energy companies in its previous efforts to divest the state of fossil fuels,” he said. “It’s more than a little suspicious.”
–With assistance from Ryan Beene and Keith Laing.
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