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 plans to offer $3,500 in immediate rebates to new EV buyers in the state.
California officials have said the new EV rebates will be partially funded by $135 million in state money, included in a recently announced budget deal struck between California Governor Gavin Newsom, a Democrat, and leaders of the state’s legislative branch. California officials said additional money for the EV rebate program will come from automaker-funded grants.
California’s plan comes nearly two years after Newsom pledged shortly after President Donald Trump’s 2024 election victory that he would take steps to offer electric vehicle tax credits to consumers if Trump follows through on a campaign promise to eliminate the popular $7,500 federal credit. Trump followed through on those pledges when he pushed legislation through Congress that would have phased out the federal tax credit on September 30, 2025.
EV proponents praised California for taking steps to fill at least part of the breach.
“The $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 carmakers to push U.S. and state lawmakers to adopt EV-friendly policies. “This legislation will provide a $3,500 cash-on-the-hood credit for thousands of first-time EV buyers in the Golden State.”
Why is California moving to offer EV tax breaks?
California has the largest percentage of car buyers who opt for electric cars.
According to the Alliance for Automotive Innovation, which lobbies in Washington, D.C., for most major automakers, about 24% of new light-duty vehicle registrations in California were made up of EV and hybrid cars in 2025, the most recent data made publicly available by the group. California was the only state above 20% market share in 2025.
Car makers have lamented the loss of federal incentives for EVs, and many have scaled back plans to build future electric models in the wake of changes in federal government 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 moving to exempt at least some portion of the country’s EV buyers as “the rest of the global market moves toward zero emissions vehicles,” despite declining levels of federal support under Trump.
Sanchez said in the interview that EV adoption is “a thing to be proud of in California,” because “one-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 the credit for 586,000 vehicles, according to the California Air Resources Board.
Are used EVs eligible for tax credits?
Under the California budget agreement, rebates will also be available for used EVs, although the amount has not yet been publicly released.
Under the old federal tax credit, used EVs were eligible for up to $4,000 in tax credits. The EV tax credit, first used in 2022, was added by former President Joe Biden’s administration. Earlier, only new EVs were eligible for any tax credits.
What happens after the federal EV tax credit ends?
Many of the most popular electric car models experienced steep sales declines 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.
According to the Auto Alliance, EV sales accounted for 9.6% of the market, down 0.6% from 2024.
Can you buy an EV from out of state in California and get the rebate?
California’s previous EV rebates were limited to state residents, and the latest round of rebates is also expected to be limited to people living in the state.
EV buyers in other states may take solace from the fact that many states have often replicated California’s auto emissions rules and some may decide to copy the state’s plans to offer rebates to buyers. According to the California Air Resources Board, 17 states have adopted at least part of California’s clean car rules in recent years.
Reporting by Keith Lang, USA TODAY/USA TODAY. USA TODAY Network via Reuters Connect.