Senate Overturns California’s EV Mandate, Hitting Tesla’s Regulatory Credit Business

In a blow to Tesla and state-level climate efforts, the U.S. Senate has voted 51–44 to revoke California’s authority to set stricter tailpipe emissions standards and ban sales of new gasoline-powered vehicles by 2035, Barron’s Daily reported.

Tesla has used California’s rules to generate $2.9 billion in credits over the past year by selling them to other automakers. I Photo: Sent Wikimedia Commons

The move nullifies a 2022 waiver granted to California—which had since been adopted by 11 other states—and undermines one of Tesla’s key revenue streams: the sale of zero-emission regulatory credits.

Tesla, which only produces electric vehicles, has used California’s rules to generate $2.9 billion in credits over the past year by selling them to other automakers.

General Motors and others had argued the waiver forced EV sales amid weakening consumer demand. California Governor Gavin Newsom denounced the vote, defending the state’s right to improve air quality.

Lawmakers used the Congressional Review Act to override the EPA’s approval of the waiver.

Separately, the House passed a federal budget bill that would cut or eliminate EV tax credits and impose new annual fees—$250 for EVs and $100 for hybrids—drawing criticism from Democrats who warned that the rollback of executive actions via the Review Act could set a precedent Republicans may regret.