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California is moving to recoup at least some of the $7,500 federal electric vehicle tax credit it recently lost to President Donald Trump’s administration and Congress.
California Governor Gavin Newsom, a Democrat considered a likely 2028 presidential candidate, announced on Friday, January 9, a plan to spend $200 million from the state’s budget to provide an “on-the-bond” electric vehicle rebate that would provide instant discounts on EVs in the state, which has more plug-in models than any other state in the nation. The governor did not specify the specific amount of credits he expects to soon be available to car buyers in the state.
California’s plan comes shortly after President Trump won the 2024 presidential election and a year after Newsom promised to step in to offer consumers discounts on electric vehicles if Trump followed through on his campaign promise to eliminate the $7,500 federal tax credit. In fact, President Trump made good on these promises and passed a bill in Congress that would end the tax credit on September 30, 2025.
Why is California stepping in to provide cash for EV buyers?
California has the highest percentage of car buyers choosing electric vehicles.
According to the Alliance for Automotive Innovation, which lobbies most major automakers in Washington, EVs and hybrids infringed on 22.9% of new light vehicle registrations in California in the second quarter of 2025, the latest data released by the group. Colorado was the only other state with a market share above 20% in the second quarter of 2025. Automakers have lamented the loss of federal incentives for EVs, and some have cut back on plans to make future electric models in light of changing federal support for the technology. California Air Resources Board Chair Lauren Sanchez said in an exclusive interview with USA Today that the state is moving aggressively in offering EV rebates because “the rest of the global market is moving toward zero-emission vehicles,” despite a decline in federal aid levels under the Trump administration. Sanchez said adopting EVs is “California pride” because “one-third of EV sales are done in California.”
Under California’s previous EV tax credit program, which ran from 2013 to 2024, the state spent $1.49 billion on tax credits for 586,000 vehicles, according to CARB.
Are used EVs eligible for rebates?
Under the old federal tax credit, used EVs could receive a tax credit of up to $4,000. The used EV tax credit was first added in 2022 by former President Joe Biden’s administration. Previously, only new EVs were eligible for the tax credit. Sanchez said California is still considering whether it can offer rebates on used EVs under Newsom’s plan.
“Given the importance of used EVs in California, the team is seriously considering how used EV incentives can work,” she said.
So what happened after the federal EV tax credit ran out?
Some of the most popular electric vehicle models saw sales decline significantly in the fourth quarter of 2025 after setting records in the third quarter as car buyers rushed to take advantage of the $7,500 federal tax credit before it expires at the end of September 2025.
Here’s how some of the best-selling EVs in the U.S. performed in Q3 compared to Q4.
- Tesla Model 3 and Model Y | Q3 2025: 481,166 | Q4 2025: 406,585
- Ford Mustang Mach-E | Q3 2025: 20,177 | Q4 2025: 9,658
- Hyundai Ioniq 5 | Q3 2025: 8,408 | Q4 2025: 2,279
- Honda Prologue | Q3 2025: 20,236 | Q4 2025: 2,641
- Volkswagen ID.4 | Q3 2025: 4,518 | Q4 2025: 248
What are people saying about California’s move to backfill EV credits?
Automakers said that incentivizing EV sales is a policy that has worked in the past and welcomed California’s move to step in to provide credits to EV buyers in the nation’s most populous state.
“At this stage in the transition and given current market conditions, consumer incentives could lead to increased adoption and affordability of EVs in California and support the national automotive and battery industry base,” Automotive Innovation Alliance President John Bozzella said in a statement.
