California regulators are advancing a two-pronged strategy to shield the state’s EV market and decouple vehicle emissions rules from federal rollback efforts. The California Air Resources Board (CARB) and five affiliated agencies are proposing to backfill the expiring $7,500 federal EV tax credit with state level incentives — possibly via vouchers, point of sale rebates or similar mechanisms — to support EV adoption, including the used-EV segment.
Simultaneously, CARB has initiated the rulemaking process for new auto emissions standards, which could take up to three years to finalize.
This effort comes in direct response to recent federal policy shifts under the Trump administration, which rolled back key provisions that previously allowed California to enforce stricter emissions standards under a Clean Air Act waiver. California regulators and the governor have characterized the rollback as “illegal” and are systematically building a regulatory and incentive framework to counterbalance the loss of federal authority and support.
Significantly, the incentive design also seeks to include low- and medium-income consumers, aiming to expand affordable EV access, which could funnel a surge of lower-cost used EVs into regional markets.
At the same time, the U.S. Department of Justice has filed lawsuits aiming to block California’s recent heavy-duty truck emissions standards, alleging federal preemption — and signalling that similar litigation may extend to passenger vehicle rules. These legal battles could create uncertainty around the enforceability of new rulemaking.
California’s zero emission vehicle (ZEV) market has been growing steadily. In 2023, new light duty ZEVs accounted for roughly 21% of new vehicle sales; the share held at approximately 25% through early 2024. Used EV inventory is also on the rise, with California holding the largest share nationwide and used EV prices falling year over year.
Furthermore, the state’s Advanced Clean Cars II regulation mandates that 100% of new vehicle sales must be zero emission by 2035, with interim targets starting at 35% in 2026.
