If President-elect Donald Trump keeps his campaign promise to eliminate the federal $7,500 tax credit for zero-emission automobiles, Governor Gavin Newsom declared intentions to revive a state rebate scheme.

However, Newsom's suggestion leaves Tesla (TSLA, Financials) out of rebate eligibility. Representing more than half of California's EV registrations, Tesla is the state's most well-known electric car maker. According to Newsom's statement, the exclusion encourages rivalry in the zero-emission car market.

The state rebate plan aims to bring back the phased-out Clean Vehicle Rebate Program in 2023. The previous initiative allegedly saved more than 456 million gallons of gasoline and supported over 549,000 car sales. Under the new plan, money would come from the Greenhouse Gas Reduction Fund created by California's cap-and-trade program.

Although Newsom has presented the action as encouraging competitiveness, tensions between Tesla and California have risen recently. Tesla, X, and SpaceX moved their offices to Texas after Musk attacked California's harsh COVID-19 lockout rules and parental notification legislation.

Introduced under the Inflation Reduction Act of 2022, President-elect Trump's planned elimination of the Clean Vehicle Tax Credit would remove incentives for EVs and hydrogen-powered cars undergoing final assembly in North America. Although many Tesla models meet the criteria now, experts think the repeal would have less of an effect on Tesla's sales than those of its rivals.

With California EV sales of 115,897 units, or 26.4% of all new car purchases in the third quarter of 2024 The state has funded $32 million in federal grants for 458 direct-current fast chargers along roads and set up over 150,000 public and shared private EV chargers. Approved for use next year is another $81.7 million in government cash.

Representing 30.3% of U.S. ZEV sales, California leads the country in zero-emission vehicle acceptance. Officials are giving charging infrastructure upgrades and wider access to EV discounts a priority as the state moves to greener transportation, even while the program's terms are still under discussion.

This article first appeared on GuruFocus.