California Doubles Down on EV Support with $200 Million Rebate Plan

California Gov. Gavin Newsom is seeking $200 million to restart state-level EV tax credits, compensating for the federal tax incentive program that the Trump administration ended in 2025. The proposal marks a significant commitment to maintaining California’s position as the nation’s largest electric vehicle market despite the loss of the popular $7,500 federal credit.

The proposed program would establish a point-of-sale incentive program for light-duty zero-emissions vehicles, providing rebates directly at the time of purchase. However, key details remain under discussion, including the amount of individual rebates and which vehicles would qualify.

Program Status and Budget Negotiations

Newsom’s proposal requires approval from California state lawmakers, who are scheduled to negotiate the broader state budget ahead of a July deadline. The initiative comes as part of the governor’s broader push to protect California’s climate agenda in opposition to federal policies.

Market Impact and Industry Response

The elimination of federal EV tax credits has had immediate effects on the automotive industry. Tesla and other automakers reported slowdowns and declines in electric vehicle sales in the fourth quarter following the loss of federal incentives, after a rush from buyers seeking to take advantage of the expired credit.

California’s proposal could provide a significant boost to struggling EV manufacturers, particularly given the state’s outsized influence on the national auto market.

Political Considerations

The proposal has been contentious. An earlier 2024 iteration included market-share caps that would have excluded Tesla’s best-selling models, drawing criticism from Elon Musk. As California’s budget gap widened, the state initially abandoned plans to backfill the federal credits, with Newsom stating the state “wouldn’t make up for federal vandalism of those tax credits.” The new proposal represents a reversal of that position.

Remaining Federal Incentives Still Available

While state-level credits are under development, federal tax credits for EV charging equipment installation remain available through June 30, 2026, offering up to $1,000 for residential installations and up to $100,000 for business installations.

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