California Governor Gavin Newsom has unveiled a controversial plan to offer state-funded electric vehicle (EV) incentives if President-elect Donald Trump eliminates the federal $7,500 EV tax credit. However, the plan notably excludes Tesla, the state’s largest EV manufacturer, raising questions about the fairness and intent behind the proposal.
Newsom declared his commitment to maintaining California’s green energy initiatives during a recent press conference, stating, “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 announcement comes on the heels of new carbon credit and refinery regulations in California, which are predicted to raise gas prices by as much as $1.15 per gallon. This shift has left Californians grappling with rising costs, particularly drivers of gasoline-powered vehicles, who now face an estimated $1,000 increase in annual pretax income requirements to offset these price hikes.
The exclusion of Tesla from the new state-funded EV credits has sparked outrage from the company’s CEO, Elon Musk. Taking to his platform X (formerly Twitter), Musk expressed disbelief at the move, pointing out that Tesla is the only company manufacturing EVs within California.
“Even though Tesla is the only company who manufactures their EVs in California, this is insane,” Musk tweeted, highlighting the contradiction in excluding Tesla while supporting out-of-state or foreign EV manufacturers.
This isn’t the first time tensions have flared between Musk and Newsom. Earlier this year, Musk relocated the headquarters of both SpaceX and X out of California, citing a regulatory environment that he views as increasingly hostile to businesses. He specifically called out a controversial law signed by Newsom banning parental notification for K-12 students seeking gender changes as a key factor in his decision to leave the state.
“This is the final straw,” Musk said in July, announcing that SpaceX would move its headquarters from Hawthorne, California, to Starbase, Texas.
Newsom’s office plans to fund the proposed EV incentives through California’s cap-and-trade program, which requires carbon emitters to purchase credits from the state. This program has been a cornerstone of California’s green initiatives but has also drawn criticism for its impact on consumers. The costs associated with cap-and-trade are typically passed on to residents through higher prices for gasoline, energy, and other essentials like concrete.
Additionally, the California Air Resources Board (CARB), whose members are largely appointed by Newsom, recently approved $105 billion in EV charging credits and $8 billion in hydrogen charging credits. These funds are also generated through the cap-and-trade program, further placing the financial burden on drivers of gasoline and diesel vehicles.
Critics argue that Newsom’s policies disproportionately impact lower- and middle-income Californians who rely on gasoline-powered vehicles. Many have also expressed frustration over the state’s allocation of funds to long-delayed and over-budget projects like the California High-Speed Rail.
Initially projected to cost $33 billion and be completed by 2020, the rail project’s budget has ballooned to $135 billion, with no completion date in sight. Critics like Alec Stapp of the Institute for Progress have labeled it a “massive boondoggle,” further questioning the state’s spending priorities.
For EV manufacturers and charging infrastructure companies, the new credits offer lucrative opportunities. However, consumers often unwittingly forfeit their rights to the credits when signing installation contracts for EV chargers. This setup creates a continuous revenue stream for companies but raises transparency concerns for buyers.
Newsom’s latest move has intensified scrutiny of California’s approach to clean energy and its broader economic impacts. While supporters praise the state’s leadership in combating climate change, detractors argue that the policies disproportionately burden taxpayers and businesses.
Tesla’s exclusion from the incentive program has become a flashpoint, with Musk’s vocal opposition underscoring a larger debate about California’s regulatory climate and its treatment of in-state businesses.
The Newsom administration has yet to address the reasoning behind Tesla’s exclusion. However, the decision could carry political and economic consequences as Musk’s companies, which have historically been major contributors to California’s economy, continue to shift operations out of state.
As California pushes forward with its ambitious green energy goals, the economic and social impacts of these policies will likely remain a contentious issue. With Tesla sidelined and gasoline costs rising, the state’s green agenda is at the center of a growing debate over fairness, feasibility, and fiscal responsibility.
