Political Fever Over EVs Spikes Confidence Among Tesla Bulls

Governor Newsom’s Bold Stance on EV Tax Credits

A prominent Tesla bull is experiencing a surge of confidence following California Governor Gavin Newsom’s recent declaration aimed at the future of electric vehicles (EVs). Announced on November 25, the Governor’s statement warned that if President-Elect Donald Trump eliminates the federal EV tax credit, California will reinstate its former Clean Vehicle Rebate program.

This program previously provided up to $7,500 to eligible residents who sought to purchase or lease eligible electric vehicles. Even though this rebate program phased out in 2023, it had already assisted over 66,000 low-income consumers, costing more than $354 million. As reported by the California Air Resources Board, the program has played a crucial role in funding the acquisition of over 594,000 EVs, leading to a fuel savings of more than 456 million gallons and the removal of over 3.9 million metric tons of carbon dioxide equivalent (CO2e) from the atmosphere.

Newsom’s Commitment To Clean Transportation

In response to skepticism about the future of zero-emission vehicles, Newsom stated, “Consumers continue to prove the skeptics wrong – zero-emission vehicles are here to stay. 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. We’re not turning back on a clean transportation future — we’re going to make it more affordable for people to drive vehicles that don’t pollute.”

Political Tensions Rise Between Newsom and Musk

Notably, the proposal outlined by the Governor’s office includes what they describe as “market-share limitations,” which would potentially render Tesla (TSLA) vehicles ineligible for the rebate. The proposal does not specify whether other major manufacturers like Ford (F) or General Motors (GM) would face similar exclusions. In response, Tesla CEO Elon Musk took to Twitter (now known as X), calling the announcement a political maneuver and labeling it “insane,” pointing out that “Tesla is the only company who manufactures their EVs in California.”

Support from Democratic Congressman Ro Khanna

Congressman Ro Khanna (CA-17) weighed in as well, echoing Musk’s concerns by deeming it “foolish” to exclude Tesla from potential EV incentives. He emphasized that Tesla’s Fremont factory employs over 20,000 workers and acknowledged the importance of not politicizing the state’s manufacturing sector. Khanna criticized the broader political tendency to ignore Tesla, referencing the Biden administration’s exclusion of Musk from a 2021 EV summit.

The Implications for Tesla’s Future

Analysts like Dan Ives from Wedbush are closely scrutinizing these developments. Following Newsom’s proposal, Ives reiterated the firm’s “Outperform” rating alongside a $400 price target for Tesla stock, suggesting that the latest maneuver could ignite a “Game of Thrones Battle” between the Governor and Musk. Ives underscored the risk in potentially excluding Tesla from tax credits, given that Tesla accounts for approximately 55% of all new EV registrations in California this year and favored Tesla’s trajectory towards autonomy and robotics, which he considers key to its future profitability.

The Bigger Picture: Potential Fallout From Eliminating EV Tax Credits

Outside the political arena, experts warn of dire consequences if Trump’s administration follows through on eliminating the federal EV tax credit. A recent report titled “The Effects of ‘Buy American’: Electric Vehicles and the Inflation Reduction Act” by UC Berkeley, Stanford, and Duke University professors predicts that such a move could lead to a 27% drop in EV sales nationwide. Their analysis suggests a stark reduction in new EV registrations, dropping from 1.184 million to 867,000, equating to a loss of approximately 317,000 EVs on U.S. roads.

As electric vehicles are a rapidly growing market, experts are keenly aware of the significance of state and federal incentives. Shapiro, Allcott, and Tintelnot emphasized that a $7,500 tax credit is no trivial matter, underscoring its pivotal role in the burgeoning EV landscape.

Conclusion

As the political tension surrounding electric vehicles continues to evolve, key players—including Tesla and the state of California—navigate a landscape fraught with potential challenges. Whether Governor Newsom’s plan will effectively bolster EV adoption, or inadvertently push Tesla to prioritize operations elsewhere, remains to be seen. The outcome will undoubtedly influence both the company’s trajectory and the broader movement toward electric and sustainable transportation in the U.S.