Tesla Inc ( TSLA ) shares closed lower on Monday. Reports indicate Tesla vehicles would not be eligible for rebates under a new California consumer rebates proposal.

What Happened: According to a Bloomberg report, California Governor Gavin Newsom outlined new plans on Monday to offer incentives for EV buyers in California if President-elect Donald Trump gets rid of the current federal $7,500 tax break for EV buyers when he returns to the White House early next year.

Newsom’s team reportedly told Bloomberg that the new proposal includes “market-share limitations” that would exclude Tesla’s EV models from tax credit eligibility.

"It's about creating the market conditions for more of these car makers to take route," the governor’s office reportedly said.

Tesla CEO Elon Musk and Newsom have a “tense” relationship dating back to before Musk decided to move Tesla’s headquarters out of California. Musk pushed back against state orders to close the company’s factory during the COVID-19 pandemic, calling them “fascist.” Newsom reportedly said Tesla owed some of its success to California.

The news follows reports from earlier this month indicating that Trump's team plans to kill the $7,500 EV tax credit on vehicle purchases as part of a broader tax-reform plan.

See Also: Tesla Faces Environmental Violations As Elon Musk’s ‘DOGE’ Prepares For ‘Garbage Collection Of Rules That Don’t Make Sense:’ Report

Musk reportedly told Trump's team that he supports putting an end to the EV tax credit. The Tesla CEO said earlier this year that removing the EV tax credit could have a slight impact on Tesla sales, but would be far worse for Tesla’s U.S.-based competitors. Analysts seem to agree.

Wedbush analyst Dan Ives said in a note following the news that the cuts are actually net positive for Tesla. The Wedbush analyst acknowledged that getting rid of the tax credit could weigh on demand, but he believes it will actually propel Tesla further ahead of competitors. 

"We expect Musk to have a big seat at the table as these EV discussions happen within the Trump transition team. We believe any sell-off in Tesla from these reports is the wrong knee-jerk reaction and we would be buyers," Ives said in a recent Tesla note.

UBS analyst Joseph Spak maintained Tesla with a Sell rating on Monday and raised the price target from $197 to $226.

TSLA Price Action: Tesla shares are up approximately 31% over the past month. The EV stock was down 3.96% at $338.59 at the time of publication Monday, per Benzinga Pro.