California Plans To Plug The EV Tax Credit Gap With $200 Million

• California hopes to bring back state incentives to boost electric vehicle adoption.
• Its Clean Vehicle Rebate project ended in 2023.
• A new budget proposal from California Governor Gavin Newsom looks to make up for the loss of the $7,500 federal EV tax credit.

California is proposing new incentives for electric vehicle buyers in a move that could soften the blow from the loss of the $7,500 federal EV tax credit, which Congress killed last September.

According to the 2026-2027 budget summary released by Governor Gavin Newsom’s office on Friday, the state is proposing to set aside $200 million to establish a new light-duty zero-emission vehicle (ZEV) incentive program. 

Photo by: Ford

The finer details, however, are still missing. The budget document doesn’t spell out how the incentives would be structured, who would qualify, or how much buyers could actually expect to save. We reached out to Newsom’s office and the California Air Resources Board (CARB) for more information, and we’ll update this story if we hear back. USA Today, which first reported the news, said the program would include “on the hood” discounts that reduce the up-front cost of a qualifying car.

Still, the intent seems clear: The state wants to keep nudging the market toward cleaner, battery-powered vehicles at a moment when EV affordability has become a growing concern.

Incentives for EV buyers may be the state’s best bet for doing that now that Congress tossed out its Advanced Clean Cars II regulations, which forced car companies to sell an escalating number of zero-emission vehicles in the state over the next several years. Those rules, which culminated in a ban on pure gas-vehicle sales by 2035, could still come back; California alleges that Congress didn’t have the authority to nix the policy and is suing. 

In the meantime, the state can plug the gap and continue to promote clean vehicle sales through these kinds of incentives. 

Photo by: Rivian

The proposal also marks a quiet reversal of sorts. When the federal EV tax credit was eliminated last year, Governor Newsom initially pledged that California would backfill with state incentives. He later walked that back, saying the state didn’t have the funds to do so. Now, with a new budget under consideration, the idea appears to be back on the table.

If the legislature signs off on the plan, the impact could be meaningful. California is by far the largest EV market in the U.S. and it’s supported by the country’s most extensive charging network. The incentives could help make EVs more accessible as automakers face a cooling electric market. 

Meanwhile, a handful of other states, including Colorado, Massachusetts and Oregon continue to offer generous state incentives. California’s latest proposal could help it maintain its leadership role in EV adoption at a time when federal support has become practically nonexistent.

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