U.S. President-elect Trump threatened to cancel the current electric vehicle tax credit, triggering a strong backlash from California's Democratic Governor Gavin Newsom. Newsom claimed that California would continue to implement this policy even if the federal government did not provide subsidies. At the same time, Newsom also said that California’s electric vehicle subsidy plan will not include Tesla, the leading company, on the grounds that it will promote more market competition and innovation.
But a number of observers pointed out that this was because of the alliance between Trump and Musk, and Newsom's idea of excluding Tesla was more like a politicized move.
Investment bank Wedbush analyst Dan Ives said that Newsom's proposal may trigger a power game between him and Musk. This is obviously a political move by Newsom and California against Musk because Musk plays an important role in the next White House and pushed the Trump administration to cancel tax subsidies for electric vehicles.
He added that the move could also pose risks to California, where Tesla is the only automaker making vehicles there and is one of the state's largest employers.
Newsom and Musk have actually had friction for a long time. In 2020, Tesla's Fremont factory in California closed due to the COVID-19 epidemic, but at that time Musk and Newsom were at odds over whether the factory needed to be closed. This also paved the way for Musk to later move Tesla’s headquarters from California to Texas and build the Austin Gigafactory.
In July this year, Musk announced that he would move his companies X and SpaceX from California to Texas. The "last straw" of this action was that Newsom signed a new law that prohibits schools from requiring teachers to notify parents of their children's changes in gender identity.
This sensitive topic directly triggered Musk's dissatisfaction with the liberalism of the Democratic Party and affected his business decisions. What adds fuel to the fire is that the California government insists that it will not retain Musk, which makes the conflict between the two parties even more tense.
Ives noted that Newsom's move could be risky given that most of the electric cars sold in California are Tesla products. If Newsom does exclude Tesla from California’s local electric vehicle tax credit, people could see Musk moving more jobs from California to Texas.
Musk himself said in an X post that Newsom's idea of excluding Tesla is crazy. Trump also later criticized Newsom’s subsidy idea, emphasizing that the cost of living in California is high and there are many homeless people. Under these conditions, the California government still insists on spending money to subsidize electric car buyers, which is undoubtedly putting the cart before the horse.