California wants to give EV rebates to car buyers

California is moving to backfill at least some of the lost $7,500 federal electric vehicle tax credit that was killed recently by the President Donald Trump's administration and Congress.

California Gov. Gavin Newsom, a Democrat thought to be likely 2028 presidential contender, announced a plan on Friday, Jan. 9 to spend $200 million in his state's money to offer an "on the hood" electric vehicle tax credit that would offer instant discounts to EVs in the state that is home to most plug-in models in the nation. The governor did not reveal the specific amount of the credits that he hopes will soon be offered to car buyers in his state.

The California plan comes a year after Newsom pledged shortly after 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 in fact follow through on those pledges when he pushed legislation through Congress that ended the tax credit on September 30, 2025.

Why is California stepping in to offer EV tax credits?

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 for most major automakers, EVs and hybrid cars composed 22.9 percent of new light-duty vehicle registrations in California the second quarter of 2025, which is the most recent data the group has made publicly available. Colorado was the only other state above 20 percent market share in the second quarter of 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 that her state is stepping up to offer EV tax credits 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 embracing EVs is "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 CARB.

Do used EVs qualify for tax credits?

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.

Sanchez said California is still sorting out whether it will be able to offer used EV tax credit under Newsom's plan.

"The team is taking a hard look at how we can a used incentive work, given how important used EVs are in California," she said.

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 the September 2025.

Here's how some of the top selling U.S. EVs fared in the third quarter compared to the fourth quarter:

• 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
• Volkwagen ID.4 | Q3 2025: 4,518 | Q4 2025: 248

What people are saying about California's move to backfill EV tax credits?

Automakers cheered California's move to step in to offer tax credits for EV buyers in the nation's most populous state, saying incentivizing EV sales is policy that has worked in the past.

"At this stage of the transition and given current market conditions, consumer incentives can lead to more EV adoption and affordability in California – and support the automotive and battery industrial base across the country,” John Bozzella, president of the Alliance for Automotive Innovation, said in a statement.