Tesla Elon Musk unveils the Tesla Semi in November 2017 in Hawthorne, California.
AFP via Getty Images
Two decades ago, when Tesla was a scrappy Silicon Valley startup, California’s pollution rules let it earn free money selling emissions credits to automakers hawking big gas hogs. Its wealthy, environmentally minded consumers became the backbone of its electric car business. That kick-started the modern EV industry and helped CEO Elon Musk become the world’s wealthiest person.
He has not been gracious about it.
Musk moved Tesla’s headquarters out of California in late 2021. He moved himself out a year earlier after ranting on an earnings call about “fascist” rules requiring Tesla to briefly halt production at its Fremont plant at the start of the Covid-19 crisis and has said the state’s regulatory agencies are intent on making “almost everything illegal.” He’s claimed the idea that Tesla relies on subsidies is farcical. “Take away the subsidies. It will only help Tesla,” he wrote back in 2024. “Also, remove subsidies from all industries!”
Now the Golden State, with the country’s most generous clean truck incentives and a vast trucking sector, is helping ex-Californian Musk yet again by serving as the main first market for Tesla’s latest offering
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The Tesla Semi — the battery-powered heavy-duty truck Musk debuted nine years ago and finally put into production in Nevada in April has so far drawn more than 1,200 California “HVIP” vouchers for buyers of zero-emission heavy-duty vehicles, worth $172 million. That’s double the number awarded to Tesla’s closest competitor. Those vouchers knock $120,000 off the Semi’s sticker price, which ranges from $250,000 for a 300-mile version to $290,000 for the 500-mile model, based on a copy of Tesla’s pricing sheet obtained by Forbes. And with an additional $1 billion of new funding for non-polluting trucks announced on May 13, the state is poised to be even more critical to Tesla.
High interest in the latest offering from the top U.S. EV brand isn’t surprising, particularly as diesel fuel prices have spiked nearly 50% since the U.S. war with Iran started on Feb. 28. But the truck’s heavy reliance on generous incentives is sharply at odds with Musk’s public stance on subsidies and on the state itself.
“A surprising number of people think that Tesla survives on subsidies,” he said in 2024. “That is true of our competitors, but not of Tesla.”
Not exactly: California’s electric truck rebates go to buyers, not manufacturers, but they prop up Tesla sales by making the pricey vehicles more affordable than they’d be without them. Tesla is among the biggest federal welfare vampires around having earned more than $13.5 billion from indirect government subsidies via pollution credit sales over the past 14 years, under programs overseen by California, the U.S. and the EU. And though Musk knocks the state and its “overbearing regulatory agencies,” it’s by far the biggest buyer of Tesla EVs in the U.S. The same will be true for the Semi.
“There’s still $200 million of HVIP funding available for those that have fleets in California, so go ahead and grab it.”
California will be a big early market because the “economics are really, really strong. That’s where a lot of our early deployments will be,” Dan Priestley, who manages the Tesla Semi program, said at the ACT Expo conference in Las Vegas this month. He also reminded the audience that “there’s still $200 million of HVIP funding available for those that have fleets in California, so go ahead and grab it.”
Tesla also expects Texas, which has both cheaper electricity and diesel prices than much of the country, as well as states in the Southeast, to be strong markets, Priestley said.
But the California offer is the more compelling one. On top of HVIP vouchers, fleet operators can also seek funds from the new $1 billion Clean Fuel Reward Program, as well as incentives from local utilities, regional environmental agencies and the state’s ports. Stacking those funds can cover up to 90% of a semi truck’s purchase price for operators of small fleets, excluding state sales taxes, registration fees, and a steep 12% federal excise tax.
The state funds don’t come directly from California taxpayers, but rather from its cap-and-trade program, which requires polluters to buy credits to offset their pollution, and revenue that utilities generate from its Low Carbon Fuel Standard, said Lindsay Buckley with the California Air Resources Board.
Elon Musk arrives to court at the Ronald V. Dellums Federal Building in San Francisco during the OpenAI trial.
Getty Images
“Heavy‑duty vehicles are among the largest contributors to local air pollution, especially in communities near ports and freight hubs,” Buckley said. “By accelerating the adoption of zero‑emission technology, these programs deliver cleaner air for Californians who suffer the most from exposure to harmful emissions.”
For now, the programs push the price of a brand-new electric Semi below that of a used diesel truck, which most small operators would otherwise buy, said Jason Roycht, whose Meridius Consulting firm works with companies in the electric trucking space
“Traditionally, nothing around the country has really compared to what California’s done in this space,” said Roycht, a former executive with Bosch and electric truckmaker Nikola. “Kudos to California. They’ve got those big ports and are trying to do the right things to get the market going.”
Some big fleet operators, including Costco, Ralphs, US Foods and Swift trucking, have received HVIP vouchers to get Tesla Semis. For now, the company’s California customers don’t include big retail and logistics companies such as Amazon, UPS and FedEx, based on current voucher data. The biggest single order for the trucks comes from WattEV, a Long Beach, California-based company specializing in electrified freight-hauling, which ordered 370 trucks worth about $100 million.
The spike in diesel prices driven by the war in Iran is doing real work for Tesla in the meantime. The cost per gallon nationwide has jumped from $3.81 a gallon on Feb. 23 to $5.63 on May 18. The price is even worse in California, owing to higher taxes and fuel requirements, where diesel currently costs $7.32 a gallon, according to the U.S. Energy Information Administration.
“There are other states that offer some form of subsidies, none are as generous as California’s, nor as well funded.”
“California has allocated a significant amount of money for the HVIP program, plus allowing `stacking,’ where a buyer can apply [port-hauling] benefits in addition to standard HVIP subsidies,” Ann Rundle, vice president of trucking industry consultant ACT Research, told Forbes. “But this is only in the state of California, and while there are other states that offer some form of subsidies, none are as generous as California’s, nor as well funded.”
ACT previously estimated that overall U.S. sales of electric semi-trucks might be about 1,400 units this year. Rundle thinks it could be a bit higher, but hasn’t revised the forecast yet.
Musk has said that Tesla will be able to supply up to 50,000 trucks a year, though it’s not clear how quickly it will ramp up to that volume or if demand is actually that high.
Production is not the only constraint. Charging is too.
California has hundreds of electric trucks in operation, but the public fast-charging network for trucks the size of the Semi remains thin.
“There’s a charging infrastructure mismatch” in California, Roycht said. “Five of the top 18 counties with Tesla voucher commitments have no operational [rapid] charging today.”
In his Las Vegas comments, Tesla’s Priestley said the company has “50 stations in progress for public charging.” Of those, more than half will be operating by the end of the year, he said. The company has also announced a partnership with truckstop operator Pilot to install heavy-duty truck chargers in California, Georgia, Nevada, New Mexico and Texas, with the first ones opening this summer.
For Tesla Semi or any competing electric truck to pencil out long-term “you’ve got to beat pre-war diesel levels.”
Exactly how much it will cost to charge up at those stations isn’t clear, though Roycht expects it to be at least 40 cents per kilowatt hour of electricity, based on current commercial charging rates. (In-house chargers operated by trucking companies will likely average closer to 30 cents per kWh.) The truck uses 1.7 kilowatt hours of power to go a mile, suggesting it costs about $200 to fuel up the 300-mile truck and more than $300 to go 500 miles.
At the current diesel price and with California’s incentives baked in, the 300-mile Tesla Semi looks attractive for now, according to Roycht. The challenge is whether that will remain the case in the months to come if diesel prices revert to the pre-war level.
“If you believe you’re Nostradamus and say, ‘I bet diesel is going to remain high. I’m going to purchase these assets and I’m going to use them for the next five years.’ Well, if you’re wrong, then in two years you’re losing money on every single contract to a diesel engine,” Roycht said. For the Tesla Semi or any competing electric truck to pencil out long-term, he said, “you’ve got to beat pre-war diesel levels.”