The California government intends to oppose Trump's plan to cancel electric vehicle incentives, and Elon Musk, a key figure in Trump's election success, seems to be caught in the middle.

On local time November 25, Monday, California Governor Gavin Newsom announced a plan that if Trump cancels federal subsidies after taking office next year, California will provide state subsidies to local electric vehicle buyers. A plan that California gradually phased out in 2023 may be restarted to replace the $7,500 tax credit that Trump intends to cancel, providing discounts to electric vehicle buyers.

The California Governor's office told Bloomberg that the current proposal includes market share restrictions, excluding Tesla's popular electric vehicle models. The details of the plan will also be discussed with the state legislature and may change in the future. The Governor's office stated that this kind of limitation is "to create market conditions for more of these types of auto manufacturers to take root."

California announced its plan that day, Tesla's stock price fell in early trading on Monday, widened losses in the closing session, and fell nearly 4% by the close.

The restrictions in the California plan mean that Tesla, which leads the market share in the usa, will be excluded from a key government incentive program. The purpose of this program is to stimulate the wider adoption of electric vehicles amid slowing growth in pure electric vehicles. Excluding Tesla may reflect the tense relationship between Newsom and Musk over the years.

In 2021, Musk decided to relocate Tesla's headquarters to Texas, partly due to disappointment with California's politics. In July of this year, after Newsom signed a bill forbidding school staff from informing parents about their children's sexual orientation, Musk announced that he would also move the headquarters of his other two companies, SpaceX and social media company X, from California to Texas.

Tesla currently holds more than half of California's new electric vehicle sales, but its market dominance is weakening. Data from the California New Car Dealers Association shows that overall electric vehicle sales have increased by 1% year-on-year in the first three quarters of this year, while Tesla's sales in California have decreased by 12.6% year-on-year. Tesla accounted for 54.5% of the total registered electric vehicles in California in the first three quarters, down from 63% during the same period last year.

More than a week ago, on November 15, the media reported that Trump's transition team plans to eliminate the $7,500 tax credit available to consumers when purchasing electric vehicles. This subsidy is one of the core measures of President Biden's Inflation Reduction Act (IRA).

Wall Street Journal noted at the time that analysts believe that Trump's plan to terminate the electric vehicle subsidies may be a good thing for Tesla, as it would inflict greater losses on its competitors.

Wedbush analyst Dan Ives stated, "Trump's election as president is overall negative news for the electric vehicle industry; however, we believe it is a huge bullish signal for Tesla."

The bullish reason is that Tesla has never been the biggest beneficiary of this subsidy; compared to Tesla, which directly sells cars, this subsidy is more beneficial for other auto manufacturers that take advantage of the "leasing loophole" for tax benefits.

In the USA, most consumers' purchased autos do not qualify for the full subsidy because many of their parts or materials come from overseas, but leased autos do not have these requirements, allowing consumers to enjoy the subsidy through leasing.

Editor/Lambor