Tesla Inc. shares closed lower on Monday following reports that the company’s vehicles would not be eligible for rebates under a new California consumer rebates proposal.
What Happened
California Governor Gavin Newsom outlined new plans to offer incentives for EV buyers in California if President-elect Donald Trump gets rid of the current federal $7,500 tax break for EV buyers. However, the proposal includes “market-share limitations” that would exclude Tesla’s EV models from tax credit eligibility.
According to Newsom’s team, the new proposal is designed to “create the market conditions for more of these car makers to take route.” This move is seen as a potential blow to Tesla, which has a tense relationship with the California government.
Tesla’s Tense Relationship with California
Tesla CEO Elon Musk and Governor Newsom have a history of disagreement, dating back to the COVID-19 pandemic when Musk pushed back against state orders to close the company’s factory. Musk has also been critical of California’s regulatory environment, calling it “fascist” at one point.
Impact on Tesla Stock
Despite the news, analysts believe that the cuts are actually net positive for Tesla. Wedbush analyst Dan Ives said in a note that the elimination of the tax credit would be far worse for Tesla’s U.S.-based competitors, and that it would actually propel Tesla further ahead of the competition.
“We expect Musk to have a big seat at the table as these EV discussions happen within the Trump transition team,” Ives said. “We believe any sell-off in Tesla from these reports is the wrong knee-jerk reaction and we would be buyers.”
TSLA Price Action
Tesla shares are up approximately 31% over the past month. The EV stock was down 3.96% at $338.59 at the time of publication on Monday.
Analyst Ratings
UBS analyst Joseph Spak maintained Tesla with a Sell rating on Monday and raised the price target from $197 to $226.
Related News
Musk reportedly told Trump’s team that he supports putting an end to the EV tax credit. The Tesla CEO said earlier this year that removing the EV tax credit could have a slight impact on Tesla sales, but would be far worse for Tesla’s U.S.-based competitors.