With new electric vehicle prices averaging nearly $55,000 and the federal government no longer offering $7,500 in tax credits for plug-in vehicles, California is planning to offer $3,500 in instant rebates to new EV buyers in the state.
California officials have said the new EV discounts will be funded in part by a $135 million pot of state money that is included in a recently announced budget deal that has been reached between California Gov. Gavin Newsom, a Democrat, and leaders in the state’s legislative branch. Additional money for the EV rebate program will come from automaker-funded grants, California officials said.
The California plan comes nearly two years after Newsom pledged shortly after President Donald Trump’s 2024 election win that he would step in to offer electric vehicle tax credits to consumers if Trump followed through on campaign promises to end the popular $7,500 federal credit. Trump did follow through on those pledges when he pushed legislation through Congress that ended the federal tax credit on Sept. 30, 2025.
EV supporters praised California for stepping in to fill at least part of the breach.
“$135 million for first-time EV buyers, matched dollar-for-dollar by automakers, adds up to more than $270 million in welcome help for new EV buyers,” said Mike Murphy, CEO of the American EV Jobs Alliance, an advocacy group that works with car manufacturers to push U.S. and state lawmakers to adopt EV-friendly policies. “This legislation will fund a $3,500 cash-on-the-hood credit for tens of thousands of first-time EV buyers in the Golden State.”
Why Is California Stepping in to Offer EV Tax Rebates?
California is home to the largest percentage of car buyers who opt for electric cars.
According to the Alliance for Automotive Innovation, which lobbies in Washington, DC for most major automakers, EVs and hybrid cars composed nearly 24% of new light-duty vehicle registrations in California in 2025, which is the most recent data the group has made publicly available. California was the only state above a 20% market share in 2025.
Carmakers have lamented the loss of the federal incentive for EVs, and several have slashed plans to build future electric models in light of the shift in the federal government’s support for the technology.
California Air Resources Board Chairwoman Lauren Sanchez said in an exclusive interview with USA TODAY in January that her state is stepping up to offer at least some portion of the nation’s EV buyers rebates because “the rest of the global market is moving toward” Zero Emission Vehicles, despite the backsliding in the level of federal support under Trump.
Sanchez said in the interview that embracing EVs is a “point of pride in California,” because “a third of EV sales are in California.”
Under California’s previous EV tax credit program, which ran from 2013-2024, the state spent $1.49 billion to cover credits for 586,000 vehicles, according to the California Air Resources Board.
Do Used EVs Qualify for Tax Credits?
Under the California budget agreement, rebates will also be available for used EVs, although the amount has not yet been released publicly.
Under the old federal tax credit, used EVs qualified for up to $4,000 in tax credits. The used EV tax credit was added for the first time in 2022 by former President Joe Biden’s administration. Prior to that, only new EVs qualified for any tax credits at all.
What Happened After the Federal EV Tax Credit Went Away?
Several of the most popular electric car models experienced steep sales drops 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 expired at the end of September 2025.
EV sales ended up representing 9.6% of the market, which was a 0.6% decrease over 2024, according to the Auto Alliance.
Can You Buy an EV in California From Out of State and Get the Rebate?
California’s previous EV rebates were limited to the state’s residents, and the latest round of discounts is also expected to be limited to people who live in the state.
EV shoppers in other states might find solace in the fact that multiple states have often replicated California’s auto emissions regulations and some might decide to copy the state’s plans to offer rebates to shoppers. According to the California Air Resources Board, 17 states have adopted at least part of California’s clean car regulations in recent years.
Reporting by Keith Laing, USA TODAY / USA TODAY. USA TODAY Network via Reuters Connect.
