On the Dash:
- California is introducing new state incentives to help offset the loss of federal EV tax credits.
- Dealers should watch for participating brands as the rebate program launches later this summer.
- The program could help support EV demand in California despite a broader slowdown in U.S. electric vehicle sales.
California Governor Gavin Newsom has signed legislation to establish a new state electric vehicle (EV) rebate program to offset the reduction in federal EV tax credits.
Starting later this summer, eligible first-time buyers can receive a $3,500 rebate on new EVs priced up to $50,000. Additionally, buyers of used EVs can qualify for a $1,750 rebate on vehicles priced up to $25,000. This $270 million program is funded through California’s state budget and contributions from participating automakers.
These rebates come in response to the elimination of the federal tax credit, which offered $7,500 for new EVs and $4,000 for used EVs, a change enacted by President Donald Trump last year. California officials state that these new incentives are intended to help maintain EV affordability and encourage their adoption.
The California Air Resources Board is expected to announce which automakers will participate in the program next month.
California’s EV market
Despite a recent slowdown in U.S. EV sales due to the loss of federal incentives, second-quarter sales improved from the previous quarter, likely influenced by rising gasoline prices. According to the International Energy Agency, EVs accounted for 7.8% of new vehicle sales in the U.S. in 2025, down slightly from 8.1% in 2024.
California remains the largest EV market in the nation, with EVs comprising approximately 20% of new vehicle sales last year, nearly half of which were from Tesla. Notably, Governor Newsom has criticized the Trump administration’s rollback of federal EV incentives and has reiterated California’s commitment to supporting electric vehicle adoption.
Moreover, the state is currently challenging the administration’s repeal of California’s 2035 gasoline vehicle phaseout regulations through ongoing litigation. The administration has also relaxed some other EV regulations, which are expected to reduce compliance costs for automakers.
California’s new rebate program aims to sustain EV demand even amid reduced federal support. However, its effectiveness will depend on the participation of automakers as well as consumer response once the incentives become available later this summer.
