Gov. Gavin Newsom’s state budget proposal includes setting aside $200 million to revive California’s rebate program for the sale of electric vehicles, on the heels of the U.S. Congress and the Trump administration eliminating federal tax credits for EVs.
Details — including how much buyers would receive — still have to be worked out and the proposal would need to pass through the California Legislature before going into effect.
Among other items inside a 307-page summary given to lawmakers Friday, a day after Newsom delivered his annual State of the State address in Sacramento, the budget proposal said, “Incentives are a critical part” of the Newsom administration’s strategy to keep zero-emission vehicles “affordable and accessible for all.”
Ivan Drury, senior manager of auto insights at Edmunds.com, said a new rebate program will help boost sales.
“Anytime you can start putting more money behind selling something that’s very expensive and has a lot of barriers to entry that go beyond just price, then you can help tip the scales in favor of a purchase versus (a consumer) not considering something at all,” he said.
But at the same time, Drury, said the extent of any sales improvement “could hinge upon a lot of the stipulations” regarding who would actually qualify for the rebates.
For more than a decade, the California Air Resources Board oversaw the Clean Vehicle Rebate Project that offered thousands of dollars to buyers of EVs, plug-in hybrids and hydrogen fuel-cell vehicles.
The rebates ended in late 2023, with Road & Track magazine citing lack of funding due to a combination of surging EV adoption rates and a drop in gas tax revenue that threatened state road repair funds.
In its final year, the program offered rebates as high as $7,500 for low- and moderate-income buyers but no rebates at all for those classified as higher income earners.
It’s not yet determined if income thresholds — or any other restrictions — will be part of the new version of the rebate program.
“Details including incentive amounts, eligibility requirements and MSRP (manufacturer’s suggested retail price) cap will be determined as part of program design,” Air Resources spokesperson Lindsay Buckley said.
Buckley went on to say the program aims to partner with the auto industry on the proposed $200 million one-time funding allocation.
“We are in active conversations with major automakers about their participation but unable to comment on specifics,” Buckley said in an email to the Union-Tribune.
California has more zero-emission vehicles on the road than any other state and in 2020, Newsom issued an executive order mandating the elimination of sales of all new gasoline-powered passenger vehicles throughout California by 2035.
But in June, Trump signed three Congressional Review Act resolutions that rescinded California’s electric vehicle rules — as well as mandates related to diesel engines.
California and 10 other states have responded by filing a lawsuit, arguing that Trump’s actions are unconstitutional and beyond the authority of Congress.
While sales of EVs and plug-ins have grown, the rate of adoption in California has been stuck in neutral for the past couple of years.
In July, the 940-page federal budget legislation dubbed the “One Big Beautiful Bill” was passed by Republicans on Capitol Hill and signed into law by Trump. It included provisions that eliminated the federal tax credit of up to $7,500 on the purchase or lease of a new EV, and $4,000 for a used one.
Sales in the third quarter jumped as people rushed to buy EVs before the tax credit expired on Sept. 30.
With the subsidies now in the rearview mirror, doubts have been raised about what happens next.
Ford has discontinued its all-electric F-150 Lightning pickup truck and, one month ago, announced massive charges of $19.5 billion that included an $8.5 billion write-down on its EV assets.
General Motors last week announced $6 billion in charges as the automaker reversed its plans to go all-in on electrifying its fleet. At the same time, Stellantis axed production of its plug-in hybrid models of the Jeep Wrangler 4xe, Jeep Grand Cherokee 4xe and Chrysler Pacifica Hybrid.
Despite the headwinds, California policymakers vow to keep the state’s EV goals in place.
“Despite federal interference, the governor maintains his commitment to protecting public health and achieving California’s world-leading climate agenda,” Buckley of the Air Resources Board said.
A number of environmental groups voiced support for bringing back the rebate program.
“The governor’s proposed budget would backstop the loss of federal incentives so that more Californians can purchase a clean vehicle,” said Victoria Rome, director of California government affairs for the National Resources Defense Council. “This is a strong signal in a tight budget year.”
The Legislative Analyst’s Office, the nonpartisan fiscal and policy adviser for the state Legislature, in November estimated an $18 billion deficit for the 2026-27 budget.
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