California will offer EV rebates if Trump eliminates $7,500 tax credit, Newsom says

California is prepared to offer state tax credits for the purchase of electric vehicles if the new Trump administration eliminates the federal EV tax credit, according to Governor Gavin Newsom.

“We will act if the Trump administration eliminates the federal tax credit, redoubling our commitment to clean air and green jobs in California,” Newsom said in a statement.

The money “could come from the Greenhouse Gas Reduction Fund, which is financed by polluters under state supervision. cap-and-trade program,” Newsom’s statement said. That fund pays for clean transportation, sustainable housing, renewable energy, water recycling and other programs.

Any new rebate money earmarked for EV rebates would have to compete with and take money away from those other programs.

Newsom is expected to provide more details about the potential rebate program during an appearance in Kern County on Monday. His statement did not say how much the program would cost or how the rebates would work.

Tax breaks can substantially lower the sticker price of a new electric vehicle – although only they know whether automakers will increase the sticker price for subsidized electric cars, and by how much.

The credits run up to $7,500 per car or truck, but only for cars assembled in the United States with a certain percentage of batteries and other parts made in countries with which the U.S. has trade agreements. Car dealers can get a tax break on cars made outside the U.S. and rented to customers. They often reduce the lease price, but this is not mandatory.

During his campaign, Trump promised to end EV tax credits. He has softened that tone in recent months as Tesla CEO Elon Musk emerged as a key financial backer and adviser.

Until it was phased out in 2023, California offered rebates on electric cars of up to $2,500. That program was largely funded by the Greenhouse Gas Reductions Fund, but because revenues from the cap-and-trade program were so volatile and unpredictable, EV buyers sometimes had to wait months before receiving their rebates.

Any new rebate program would be a “new version” of the old one, the governor’s statement said, and “include changes to promote innovation and competition in the ZEV market.” ZEV stands for Zero Emission Vehicles.

According to the governor’s office, 115,897 such cars were sold or rented in California in the third quarter of 2024, or 26.4% of new car registrations. (Figures released by the California New Car Dealers Assn. are slightly lower.)

Under an edict from Newsom in 2020, 35% of annual new car sales must be zero-emission by model year 2026 and 100% by 2035. Consumers will determine whether these thresholds are met. The edict requires automakers to sell a certain percentage of electric vehicles, but it does not require consumers to buy them.