There’s been much speculation about President-elect Donald Trump’s administration and its potential impact on Elon Musk’s companies. The most unusual twist involves Tesla, as Musk supports ending subsidies for purchasing electric vehicles (EVs).
However, what might seem like bad news for Tesla isn’t such a big deal. The company’s market position is so dominant that subsidies benefit its competitors more than Tesla. From this perspective, it’s not surprising that Musk donated as much as $119 million to Trump’s presidential campaign.
Currently, the federal government offers up to $7,500 in tax credits for EV purchases. Trump has called this the “Green New Scam,” signaling his intent to reduce or eliminate such incentives.
California, the nation’s largest EV market, is resisting this measure, continuing its long-standing commitment to electric mobility and policies that reward EV buyers.
The EV State Wants to Rein in Tesla
California leads the country in EV sales by a wide margin. According to the Department of Energy, the state registered 1,256,646 electric cars in 2023. Florida ranked second with 254,278 registrations, followed by Texas with 230,125.
The gap is significant—only New Jersey, New York, and Washington registered more than 100,000 EVs in 2023.
California is among the most progressive states in the nation. In the most recent election, Democrats secured 58% of the vote compared to 38% for Republicans, marking one of the most decisive victories for Vice President Kamala Harris over Donald Trump.
California, a Democratic stronghold, has been promoting the sale of EVs for more than 25 years.
Its commitment to EVs isn’t new. In 1998, the California Air Resources Board required that 2% of all cars registered in the state be all-electric, with plans to increase that to 10% by 2003. While the program ultimately failed, it laid the groundwork for Tesla’s rise.
Tesla gradually gained prominence, attracting Toyota’s attention by the late 2000s. Tesla helped develop the second-generation electric Toyota RAV4, and Toyota, in turn, provided Tesla with its Fremont plant, crucial for producing the Tesla Model S.
Tesla has since grown from a niche brand for Hollywood celebrities to selling nearly two million vehicles annually. In California, its dominance remains unparalleled. While its market share has declined, Tesla still controlled 55% of California’s EV market as of September, according to Business Insider. Nationwide, Tesla has historically sold more than half of all EVs.
Tesla’s dominance is one reason Musk opposes EV purchase subsidies. “Take away the subsidies. It will only help Tesla,” Musk posted on X.
California, a Democratic stronghold, has other plans. The state wants to keep tax credits for EV purchases but is exploring new criteria for allocating them. According to Bloomberg, California is negotiating the size of these incentives and the eligibility criteria. Tesla may be excluded, as state officials argue that it sells too many cars to warrant additional subsidies.
“It’s about creating the market conditions for more of these car makers to take root,” the California governor’s office told Bloomberg. However, it remains unclear whether this approach would apply to other manufacturers with significant market shares.
Tesla’s exclusion from California’s subsidy program would mark another setback. Its sales in California have already been declining. As of September, Tesla’s California sales were down 12.6% year-over-year, even as overall EV sales in the state rose 1%. Analysts have attributed some of this decline to Musk’s alignment with Trump.
Image | Alexey Komissarov (Unsplash) | Alexey Komissarov (Unsplash)
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