California proposes $200 million EV incentive programme

California is preparing a new round of financial support for electric vehicle purchases as part of its 2026–2027 budget planning. The administration of California Governor Gavin Newsom has proposed setting aside $200 million to establish a new incentive programme for light-duty zero-emission vehicles. However, critical details are still missing.

The proposal follows the discontinuation of the $7,500 federal tax credit for new electric vehicles and the $4,000 credit for used models, both of which were scrapped by the government at the end of September 2025. State data and industry reporting indicate that EV sales in California declined in the final months of 2025 following the removal of federal incentives.

Key design details still undefined

According to the budget summary now released by the governor’s office, the new programme would provide financial incentives to qualifying buyers, although detailed design elements have not yet been published. The document does not specify rebate values, income thresholds, vehicle eligibility, or whether incentives would be applied at the point of sale or claimed retrospectively. The California Air Resources Board has confirmed that programme details are still under development.

The proposed scheme would follow the earlier Clean Vehicle Rebate Project, which ended in 2023 after allocating $1.49 billion to support approximately 586,000 vehicle purchases since its launch. That programme played a central role in accelerating early EV adoption in the state. In 2024, the state earmarked 242 million dollars to support low-income households when purchasing an EV.

Incentives return amid regulatory uncertainty

The idea of offering a state incentive following the end of the federal EV tax credit is not completely new. Newsom already announced that he would look into the issue shortly after the election of Donald Trump in 2024. At the time, he said he would also look to exclude Tesla from the incentive programme, showing his discontent with political actions by Tesla CEO Elon Musk. The plan was scrapped due to Newsom saying that California’s budget was too tight. However, it is now back on the table and will likely also support Tesla vehicles. But again, the scheme’s details are still missing.

The budget proposal also comes amid legal uncertainty surrounding California’s vehicle emissions framework. The state is contesting congressional action that sought to overturn its Advanced Clean Cars II regulations, which require increasing shares of zero-emission vehicle sales and set a target of ending new combustion-only vehicle sales by 2035. While the regulatory dispute continues, direct purchase incentives are positioned as a separate policy mechanism.

If approved by the state legislature, the new funding would reinforce California’s position as the largest electric vehicle market in the United States, supported by an extensive public charging network. Other states, including Colorado, Massachusetts and Oregon, continue to operate state-level EV incentive programmes, providing additional context for California’s proposed measures.

ebudget.ca.gov (PDF; pg. 47), usatoday.com, insideevs.com