Tesla's electric cars will likely not be subject to new tax breaks from the U.S. state of California, Reuters reports.

The proposal is still under development. The update came from state Governor Gavin Newsom's office on Monday, November 25.

Reuters reported this month that Trump's transition team is considering eliminating the $7,500 federal tax credit for electric vehicle purchases.

Tesla CEO Elon Musk, a close Trump ally, has sharply criticized the idea of stripping the company of the tax break.

“Even though Tesla is the only company that makes its electric cars in California! This is insane,” Ilon Musk wrote in his microblog on social network X.

The state is facing financial difficulties, with an estimated $2 billion budget deficit next year. Electric vehicles account for 22% of vehicle sales in California.

However, Musk and Newsom argued on a number of public policy issues, the media outlet writes.