Tesla would likely be excluded from California state EV tax proposal

New throughout, adds governor's office statement

By David Shepardson and Akash Sriram

Nov 25 (Reuters) - Tesla's TSLA.O electric vehicles likely would not qualify for California's new state tax credits under a proposal in the works if President-elect Donald Trump scraps the federal tax credit for EV purchases, Governor Gavin Newsom's office said on Monday.

Trump's transition team is considering elimination of the federal tax credit of $7,500 for EV purchases, Reuters reported this month. Tesla CEO Elon Musk is a close Trump adviser and says he supports eliminating all subsidies for EVs, oil and gas.

Newsom said on Monday that if Trump eliminates a federal EV tax credit, he will propose creating a new version of the state’s Clean Vehicle Rebate Program that ended in 2023 and spent $1.49 billion to subsidize more than 594,000 vehicles.

"The governor’s proposal for ZEV rebates, and any potential market cap, is subject to negotiation with the legislature. Any potential market cap would be intended to foster market competition, innovation and to support new market entrants," the office said.

Tesla did not immediately respond to a request for comment. Tesla shares fell 1.4% on Monday.

California provided up to $7,500 for the purchase or lease of a new plug-in hybrid, battery or fuel cell EV and could potentially be paid for by the Greenhouse Gas Reduction Fund which is funded by polluters.

Musk and Newsom have clashed over state policies such as shutting the Fremont factory during the pandemic and California's approval of a bill on transgender kids.

In 2021, Tesla moved its headquarters from California to Texas, and Musk said this year, his other companies such as SpaceX and social media platform X will follow suit.

California has crossed the 2 million mark for sales of zero-emission vehicles, doubling total sales since 2022.

Last month, a California official said he expects the Environmental Protection Agency to approve the state's plan to halt the sale of gasoline-only vehicles by 2035, a proposal that major automakers have met with skepticism.

California's rules, which have been adopted by a dozen other states, require 80% of all new vehicles sold in the state be electric by 2035 and no more than 20% plug-in hybrid electric.

(Reporting by David Shepardson in Washigton and Akash Sriram in Bengaluru; Editing by Krishna Chandra Eluri and David Gregorio)

((Akash.Sriram@thomsonreuters.com; On X as @HoodieOnVeshti; +91-74116-87774;))