The brewing conflict between California Governor Gavin Newsom and Tesla CEO Elon Musk is escalating, threatening to reshape California’s economic landscape and potentially trigger a significant shift in Tesla’s workforce. Newsom’s proposed revision to the state’s Clean Vehicle Rebate program excludes Tesla, a move that has drawn fierce criticism from Musk and sparked concerns about job losses in California.
Wedbush Securities analyst Dan Ives, in a recent Bloomberg interview, described the situation as a full-blown battle, likening it to a celebrity boxing match. He highlighted the political stakes involved, emphasizing that Tesla is the only major electric vehicle manufacturer with significant manufacturing operations based in California. Ives suggests that the exclusion from the rebate program could act as a catalyst, accelerating the transfer of jobs from Tesla’s Fremont, California facility to its rapidly expanding Gigafactory in Austin, Texas.
The rationale behind Newsom’s proposal is to bolster competition within the electric vehicle market and prepare for potential federal cuts to EV tax credits. However, Musk has vehemently denounced the plan, labeling it “insane” and warning of potential negative repercussions for California’s economy. This public clash is just the latest chapter in the ongoing tension between Musk and Newsom, marked by previous disagreements over COVID-related factory shutdowns and Tesla’s 2021 decision to relocate its headquarters to Texas.
Despite the controversy, Wedbush Securities maintains an “Outperform” rating on Tesla shares, with a price target of $400. This reflects a belief in the long-term prospects of the company, even amidst the uncertainty surrounding its relationship with California. However, the potential job migration presents a significant concern for California’s manufacturing sector and its economy as a whole. The state risks losing not only jobs but also the significant economic impact associated with Tesla’s substantial operations in Fremont.
Tesla’s stock closed at $338.23 on Tuesday, experiencing a slight dip of 0.11% for the day. However, after-hours trading showed a slight increase of 0.57%. The stock has seen a remarkable year-to-date surge of 36.15%, according to Benzinga Pro data. This demonstrates the continued investor confidence in Tesla’s overall performance despite the current political headwinds in California.
The situation remains fluid, but the potential impact of Newsom’s decision on Tesla’s operations and California’s economy cannot be understated. The coming weeks and months will be crucial in determining the extent of job relocation and the overall fallout from this high-stakes political and economic clash.
