(Bloomberg/Eliyahu Kamisher, Keith Laing and Kara Carlson) — With President Donald Trump set to ax a key electric vehicle tax credit next month, California Governor Gavin Newsom has yet to advance his highly touted proposal to restart the state’s own EV subsidies, according to people familiar with the discussions.
To provide a safeguard for EV buyers and the industry, Newsom last year pledged to renew a state program that provided up to $7,500 in rebates for zero-emission vehicles if Trump ended a similar federal tax credit. After Trump signed his One Big Beautiful Bill last month, the federal credits are set to expire on Sept. 30.
But Newsom has yet to present a plan to legislative leaders who control California’s finances, according to a person familiar with the discussions. Inside the governor’s office, officials are engaged in early talks about restoring a subsidy, including whether the state can match the federal EV credit dollar-for-dollar or offer a lower amount, according to another person. The state’s previous subsidy program ended in 2023.
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The pledge to restore it, which was one of Newsom’s first major policy responses to Trump winning a second term in office, has receded from public attention while the governor spars with the president over immigration raids, trade policy and higher-education funding.
The pending expiration of federal rebates sets the stage for a nationwide rush of EV buying before the $7,500 federal credit expires. Tesla Inc., which has a significant manufacturing facility and offices in California, and Rivian Automotive Inc. and Lucid Group Inc., which are headquartered in the state, all noted in recent earnings calls that they’re expecting the third quarter to be their strongest this year.
Advocates say they’re hoping states across the country will step in to fill the void left by Trump’s elimination of the subsidy. California, the country’s largest car market, is viewed as crucial to that effort.
If nothing is announced about states’ future plans, “you’re likely to see a dip in the fourth quarter,” said Corey Cantor, research director at the Zero Emission Transportation Association, which lobbies for EV-friendly policies.
In a July letter, a coalition of industry advocates, including Rivian and the charging infrastructure company Terrawatt, called on Newsom “to provide a stabilizing counterforce to recent federal shocks” to the zero-emissions industry. The groups want California to reinstate the EV rebates and expand the eligibility to wealthier buyers.
Rivian said it hopes California will have an EV rebate in place to boost sales of its more affordable SUV model slated to be on the market in the first half of 2026, a company spokesperson said.
Newsom’s initial proposal, introduced before Trump took office in January, sought to restore a program that expired in 2023 after distributing $1.5 billion in rebates, nearly half of which went toward Tesla purchases. However, funding uncertainties and legislative support were always significant concerns. Tesla Chief Executive Officer Elon Musk called the proposal “insane” after Newsom’s office suggested it could include market-share restrictions that would essentially exclude Tesla from a renewed subsidy in favor of smaller automakers.
“We will intervene if the Trump administration eliminates the federal tax credit, doubling down on our commitment to clean air and green jobs in California,” Newsom said in November. “We’re not turning back on a clean transportation future — we’re going to make it more affordable for people to drive vehicles that don’t pollute.”
Potential Avenue
Now lawmakers and advocates are hashing out plans to extend the state’s cap-and-trade program past the 2030 sunset date as a potential avenue for funding EV subsidies. The program, a cornerstone of California’s efforts to fight climate change, has raised roughly $33 billion for environmental programs by forcing large polluters to pay for carbon emissions while adding about 23 cents to the price of a gallon of gasoline in the state.
While cap-and-trade could be the funding source for an EV subsidy, money for the program could be limited. Newsom and lawmakers already committed $1 billion annually – about a quarter of the program’s yearly revenue – to the state’s high-speed rail project and tapped the climate fund for firefighting crews. That leaves climate-change groups, public transit agencies, electric vehicle advocates and others lobbying for the remaining dollars.
“We continue to work with our legislative partners and leadership to advance the joint effort announced in April to extend the state’s Cap-and-Invest program,” Newsom’s office said in a statement. “Pending these discussions, this could include new zero-emission vehicle incentives.”
Lawmakers return to Sacramento on Aug. 18, just six weeks before the federal EV program run out, with an agenda that includes a politically charged push to redraw California’s congressional maps if Texas moves ahead with its own redistricting. Newsom signed the state’s $321 billion budget for fiscal 2026 in June, closing a $12 billion shortfall, meaning any new immediate EV incentive program would have to be funded outside the regular budget process.
Whether California renews its electric vehicle rebate could meaningfully lift the market for EVs, said Joseph Yoon, a consumer insights analyst at Edmunds. “These programs have been important at driving EV adoption, and in places incentives continue to exist or get expanded out it may be a little bit of relief,” said Yoon.
In the first half of the year, EVs accounted for 19.5% of all vehicles registrations, according to a report from the California New Dealers Association, down slightly from the 21.4% of sales for the same period a year prior.
Tesla, the largest seller of EVs in the state, has seen a sharper sales slump, including an 18.3% year-over-year drop in California sales in the first half of the year, as the company faced consumer backlash over Musk’s political activity and increased competition for its aging lineup.
–With assistance from Andrew Oxford.
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