California Gov. Gavin Newsom is proposing a $200 million plan to revive state incentives for electric vehicle buyers, seeking to stabilize the market after the expiration of federal tax credits led to a sharp slowdown in EV sales, according to state officials.
The proposal, included in Newsom’s 2026–27 budget, would fund a new rebate program offering point-of-sale discounts for eligible zero-emission vehicles. The plan is intended to replace incentives that disappeared when federal EV tax credits expired in September, a change that industry analysts say cooled consumer demand nationwide.
Details of the proposed program, including rebate amounts, income limits and vehicle eligibility, have not yet been finalized. The plan must also be approved by the California Legislature during budget negotiations this spring.
The governor’s office said the funding would be administered by the California Air Resources Board, which previously oversaw the Clean Vehicle Rebate Project, a long-running incentive program that ended in 2023 after distributing nearly $1.5 billion to buyers of electric and plug-in hybrid vehicles.
State officials say the new incentives are designed to address affordability concerns that have emerged as EV prices remain higher than comparable gasoline-powered models for many consumers
California is the nation’s largest EV market, accounting for roughly one-third of all electric vehicles sold in the United States. However, state officials acknowledge that sales growth slowed significantly after the federal government ended tax credits of up to $7,500 for new EVs and $4,000 for used electric vehicles last year.
Transportation remains California’s largest source of greenhouse gas emissions, representing more than one-third of the state’s total output, according to the Air Resources Board. State policy has long emphasized electrification as a cornerstone of its emissions-reduction strategy, alongside stricter vehicle emissions standards and expanded charging infrastructure.
The environmental group Natural Resources Defense Council (NRDC) is welcoming the proposed funding for EVs.
“Governor Newsom made clear that California will move forward forcefully with our clean energy and climate progress," said Victoria Rome, senior director of California government affairs, Center for Campaigns & Organizing, at NRDC. "As the fourth-largest economy in the world, California has an opportunity and an obligation to continue leading, especially as the federal government tries to take us back to the days of smog-filled skies. The governor’s proposed budget would backstop the loss of federal incentives so that more Californians can purchase a clean vehicle. This is a strong signal in a tight budget year. "
Automakers have been adjusting their electric vehicle strategies amid softer demand and shifting regulations. General Motors recently announced a multibillion-dollar write-down tied to slower EV adoption, and also as we recently reported, Stellantis is axing all of its plug-in hybrid offerings in North America.
The proposal also comes amid broader political tension over vehicle emissions policy. The Trump administration has moved to roll back several clean transportation initiatives, including limits on California’s authority to set its own emissions standards. California officials argue that state incentives are necessary to counterbalance federal policy changes and preserve the state’s leadership role in clean transportation.
Other states, including Colorado, Oregon and Massachusetts, continue to offer their own EV rebates, creating competition among states for both consumers and manufacturers.
California lawmakers are expected to scrutinize the proposal in upcoming budget hearings, where some may push for targeted incentives aimed at low- and moderate-income buyers or expanded support for used electric vehicles. Newsom’s office said additional program details will be released as the budget process continues.
If approved, the $200 million allocation would represent one of the largest state-led efforts to offset the loss of federal EV incentives and could influence similar actions in other states weighing how to sustain electric vehicle adoption in a changing policy environment.
Editorial Use Only: Santa Monica, CA, May 10, 2025. Heidi Besen/Shutterstock.com.