Tesla (NASDAQ:TSLA) CEO Elon Musk and California Governor Gavin Newsom are no buddies and have clashed over issues before. And going by Newsom’s latest move, it is unlikely he will be invited by Musk to share a Christmas drink.
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In response to the anticipated rollback of the federal EV tax credit under President Trump’s administration in January, Newsom unveiled plans for a revamped California Clean Vehicle Rebate program. In a twist likely to spark controversy, the governor hinted that Tesla might be left out of these incentives – an effort, he claims, to ignite more competition and innovation in the EV space.
That, says Wedbush analyst Daniel Ives, could set off a “Game of Thrones Battle vs. Musk if Newsom actually goes ahead with this threat.”
“Now time will tell once Trump eliminates the federal tax credit in January if Newsom actually goes ahead with the threat and leaves Tesla out of this California EV ZEV program,” Ives went on to add.
With Musk now a major player in the new Trump White House and expected to play a key role in eliminating federal tax credits, Ives says this is “clearly a political move from Newsom.”
However, given that Tesla accounts for the majority of EVs sold in California, it could be a risky one. Tesla is currently the only EV manufacturer with production in the state, and excluding the company from these tax credits might prompt Musk to shift more jobs from Fremont to Austin. Tesla represented 55% of all new EV registrations in California year-to-date and has been the dominant player in the state’s EV market over the past five years.
It’s worth noting that the California program was phased out last year after it essentially ran out of funding. However, Newsom has emphasized that ZEVs (zero-emission vehicles) are now set to be a permanent fixture on the roads.
Looking at the bigger picture, while Ives considers the removal of federal EV tax credits as a negative for the industry, it will be a positive for Tesla.
“Tesla has the scale and scope that is unmatched in the EV industry and this dynamic will give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment starting in 2025, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players (BYD, Nio, etc.) from flooding the US market over the coming years,” Ives explained.
Ives, one of Tesla’s most bullish analysts, continues to back the stock with an Outperform (i.e. Buy) rating and a $400 price target, suggesting a 20% upside in the months ahead. (To watch Ives’ track record, click here)
However, the broader analyst consensus paints a less enthusiastic picture. With a breakdown of 14 Holds, 11 Buys, and 9 Sells, the consensus rating lands at Hold (i.e. Neutral). Moreover, the average price target suggests a bearish outlook; at $233.67, this projection implies the stock is overvalued by ~30%. (See Tesla stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
