Nov 25 (Reuters) -

Tesla's electric vehicles likely would not qualify

for California's new state tax credits under a proposal in the

works if President-elect Donald Trump scraps the federal tax

credit for EV purchases, Governor Gavin Newsom's office said on

Monday.

Trump's transition team is considering elimination of the

federal tax credit of $7,500 for EV purchases, Reuters reported

this month. Tesla CEO Elon Musk is a close Trump adviser and

says he supports eliminating all subsidies for EVs, oil and gas.

Newsom said on Monday that if Trump eliminates a federal EV

tax credit, he will propose creating a new version of the

state's Clean Vehicle Rebate Program that ended in 2023 and

spent $1.49 billion to subsidize more than 594,000 vehicles.

"The governor's proposal for ZEV rebates, and any

potential market cap, is subject to negotiation with the

legislature. Any potential market cap would be intended to

foster market competition, innovation and to support new market

entrants," the office said.

Tesla did not immediately respond to a request for

comment. Tesla shares fell 1.4% on Monday.

California provided up to $7,500 for the purchase or

lease of a new plug-in hybrid, battery or fuel cell EV and could

potentially be paid for by the Greenhouse Gas Reduction Fund

which is funded by polluters.

Musk and Newsom have clashed over state policies such as

shutting the Fremont factory during the pandemic and

California's approval of a bill on transgender kids.

In 2021, Tesla moved its headquarters from California to

Texas, and Musk said this year, his other companies such as

SpaceX and social media platform X will follow suit.

California has crossed the 2 million mark for sales of

zero-emission vehicles, doubling total sales since 2022.

Last month, a California official said he expects the

Environmental Protection Agency to approve the state's plan to

halt the sale of gasoline-only vehicles by 2035, a proposal that

major automakers have met with skepticism.

California's rules, which have been adopted by a dozen other

states, require 80% of all new vehicles sold in the state be

electric by 2035 and no more than 20% plug-in hybrid electric.