Tesla (TSLA) stock fell nearly 4% yesterday on news that the EV (electric vehicle) maker could be excluded from California’s proposed EV Tax Rebates scheme owing to its lion’s share in the market. California Governor Gavin Newsom to the federal EV tax credits of $7,500 on EV purchases.
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Here’s Why Tesla Could be Cut Off from Tax Rebates
Newsom aims to recreate the state’s Clean Vehicle Rebate Program, which was phased out in 2023 after the IRA’s EV tax credits came into effect. Tesla’s EV models could be excluded from the rebate program because of market share limitations. The Governor is focused on a greener and cleaner future for the state, and the money for the new program could come from California’s Greenhouse Gas Reduction Fund. California remains one of the biggest advocates of zero-emission autos, selling over 2 million EVs so far.
Musk called the possible exclusion of Tesla “insane” on an X post. Under California’s earlier scheme, around 42% went to purchasers of Tesla’s EV. The program used to give tax credits of up to $2,500 on electric car purchases. The proposed revival of the program would first have to undergo the state legislature to go into effect. Leaving Tesla’s electric autos out of the program could be a big loss both for the car maker and the state, considering it used to be Tesla’s manufacturing hub and one of the largest markets.
Earlier too, Musk and Newsom have clashed on a number of issues and engaged in political debates, which was one of the reasons for Musk to move Tesla’s headquarters to Texas. According to the California New Car Dealers Association, Tesla’s share in the state’s EV register fell to 54.5% in the first nine months of 2024 from 63% in 2023. Remarkably, stats show that the overall adoption of EVs is declining and cutting out Tesla from California’s new rebate program could intensify the sales trajectory for the EV king. For now, the discussions are in the initial stages, and only time will tell how the new reforms shape the Musk-owned company’s future.
Is Tesla a Buy, Sell, or Hold?
Analysts have become highly cautious of Tesla’s current share price surge related to the post-election rally. Since November 4, TSLA stock has zoomed over 39%.
On TipRanks, TSLA stock has a Hold consensus rating based on 11 Buys, 14 Holds, and nine Sell ratings. The average Tesla price target of $232.64 implies 31.3% downside potential from current levels. Year-to-date, TSLA shares have gained 36.3%.
