Tesla’s exclusion from a new EV proposal could ignite a ‘Game of Thrones’ style feud

California Gov. Gavin Newsom is ruffling a lot of feathers — including Elon Musk’s — with his new proposal for electric vehicle incentives that would exclude Tesla’s (TSLA-1.58%) popular models.

Newsom’s plans would be a state-level answer to the Inflation Reduction Act’s $7,500 tax credit for consumers buying EVs, which President-elect Donald Trump is likely to repeal. It would include reviving a program the state phased out in 2023 and would include market-share limitations that would keep Tesla EVs like the Model Y from participating. However, the governor’s office told Bloomberg News that details aren’t set in stone.

“Even though Tesla is the only company who manufactures their EVs in California! This is insane,” Musk wrote on X. Tesla makes the Model Y, 3, X, and S EVs at its plant in Fremont, California.

Such a move would give Tesla’s competitors an edge in the country’s largest market for EVs at a time when sales growth is slowing, and automakers are looking to enhance their offerings. Most of Tesla’s EVs currently qualify for the IRA’s tax credits, although Musk has advocated for ending all federal subsidies for passenger vehicles.

RBC Capital Markets (RY+0.90%) analyst Tom Narayan wrote that Newsom’s proposal would be negative for Tesla, noting that the federal EV tax credit helps the company compete with traditional gas-powered vehicles. Wedbush Securities’ Dan Ives forecasts the possibility of a “Game of Thrones Battle vs. Musk” if Newsom goes ahead with the current proposal, hypothesizing that Tesla could move jobs from Fremont to the company’s plant in Austin, Texas.

“This is clearly a political move of Newsom and California towards Musk which now has a front seat to the Trump White House and will be key player in ultimately getting these federal tax credits wiped away,” Ives wrote.

This isn’t the first time — nor will it probably be the last — that Newsom and Musk have clashed.

Musk was a frequent critic of state orders to shut down the Fremont factory during the Covid-19 pandemic, even slamming orders as “fascist” and calling to “FREE AMERICA NOW.” He reopened the plant without permission in May 2020 and pledged to move the company’s headquarters to Texas, where it is now based.

Although Democrats largely have an unfavorable view of Musk, who has become a staunch ally and participant in Trump’s circle, not all of the party is cheering on Newsom’s proposal.

“Tesla makes over 550,000 vehicles in Fremont in my district & employs over 20,000. Let’s not play politics with keeping manufacturing in California. It would be foolish to exclude Tesla,” Rep. Ro Khanna, who represents California’s 17th district in Congress, said on X.

“Have we learned nothing from snubbing @elonmusk at the Biden EV summit?” he added, referring to a 2021 event where President Joe Biden touted General Motors (GM+1.30%), Ford (F0.00%), and Stellantis (STLA+1.43%)’ EV efforts and excluded Tesla. Although that incident is not the only reason Musk has allied with Republicans, it is one over which he has held a years-long grudge.