California’s Governor, Gavin Newsom, says that the state will offer tax incentives for EV sales if the US government drops them. At this point, the industry believes President Trump will kill the federal government program. The state credits can be as high as $7,500, a significant reason for people to consider EVs over gas-powered cars. Newsome’s decision has one crucial exception: Tesla (NASDAQ: TSLA) purchasers will not get the tax benefit. That is an important issue for America’s largest EV company in terms of market share. California is by far the largest EV market in the US.
California did have an EV tax credit program, but it ended in 2023. Newsome told Bloomberg that the arrangement would be resurrected, and he said the new one would include a provision for market share. He called these “market share limitations” when he talked to Bloomberg about the program.
The California Air Resources Board says the state has over 30% of all EVs sold in the US. This is not entirely because of California’s population, which is about 13%, the largest of any state in America. It may have to do with gas prices. In large cities in California, the price of a gallon of regular gas can be twice the national average.
California’s legislature needs to vote on the Newsom plan, which could change, so it is too early to say how it would affect Tesla’s US revenue. Tesla’s current US EV market share is 49%, and a drop in sales in California would dent that.
The decision would also hurt Tesla’s share price, which has increased 25% in the last month. After the news about Newsom’s proposal, it dropped 4%.
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