Jan. 13, 2026, 2:47 p.m. PT
California is gearing up to plug a major hole in the nation’s electric-vehicle landscape. With the federal $7,500 EV tax credit wiped out by President Donald Trump and Congress late last year, Gov. Gavin Newsom is moving to deploy state dollars to keep electric car sales from losing momentum.
On Friday, Jan. 9, Newsom unveiled a $200 million plan to offer a new “on‑the‑hood” rebate—an instant discount at the dealership aimed at softening the blow for California drivers and preserving the state’s status as the country’s EV stronghold. While Newsom didn’t specify how large the rebate will be, he cast the effort as California once again stepping in where Washington won’t.
Here’s what to know about the California EV rebate program.
Why is California stepping in to offer EV tax credits?
California has the highest percentage of car buyers who choose electric cars.
According to the Alliance for Automotive Innovation, which lobbies in Washington for most major automakers, EVs and hybrids accounted for 22.9 percent of new light-duty vehicle registrations in California in the second quarter of 2025, the most recent data the group has made publicly available. Colorado was the only others 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 “a 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 EV tax credit was added in 2022 by the Biden administration. Prior to that, only new EVs qualified for any tax credits.
Sanchez said California is still sorting out whether it will be able to offer a 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.
How Californians can get the tax credit rebate
California officials say the program will function as an “on‑the‑hood” discount, meaning buyers receive the rebate instantly at the dealership rather than waiting for tax season. Here’s what to expect based on how similar state programs have operated:
- Point‑of‑sale enrollment: Buyers will likely sign a short form at participating dealerships, which will apply the discount directly to the purchase price.
- Income and vehicle requirements (pending): CARB says it is still finalizing details, but past programs included income limits and price caps to prioritize middle‑income buyers and affordable EV models.
- New vs. used EVs: California hasn’t confirmed whether used EVs will qualify, but officials say they are evaluating options due to the state’s large used‑EV market.
- Launch timeline: Newsom’s office has not announced a launch date, but the administration says it aims to offer rebates “soon,” with CARB expected to publish full eligibility rules once finalized.
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 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 and offer tax credits for EV buyers in the nation’s most populous state, saying incentivizing EV sales 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.
