Gavin Newsom brings back EV tax credits to maintain edge on China

After reneging on his promise to replace a popular federal subsidy for electric vehicle owners, Gov. Gavin Newsom has signed legislation that will still incentivize car buyers to go electric.

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On Monday, Newsom’s office announced he had signed Senate Bill 168, which will create instant $3,500 rebates for first-time EV buyers. The new program will go into effect “later this summer.”

“With our new instant rebate program for electric vehicles, we’re making it easier for families to drive clean, breathe clean, and keep more money in their pockets,” Newsom said in a news release.

Newsom had said in September that the state couldn’t afford to replace the federal electric vehicle tax credit that expired the same month. Now, new EV owners will instead receive a rebate applied before they leave the lot. 

To be eligible for the instant rebate, drivers must be buying a new vehicle retailing for up to $50,000. A ​separate $1,750 rebate is also available for EVs costing up to $25,000.

The rebate marks another turn in Newsom’s quest to find an alternative to the federal program. In January, Newsom changed course again when he set aside $200 million for an EV rebate, which his office told SFGATE would replace the previous subsidy.

In a news release announcing the new rebate, Newsom said that by eliminating the federal tax credit, the Trump administration has handed the reins to China to win the “global clean car race.” China has a fast-growing electric vehicle market where the cheapest EV sells for $6,560, far less than the average new car price of more than $50,000 in the United States, according to Reuters.

“Donald Trump is doing everything in his power to pollute our air and surrender the clean car industry to China on a silver platter,” Newsom said. “California is putting its foot on the accelerator.”

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In 2008, the federal government passed the Energy Improvement and Extension Act, which created an incentive program for electric vehicle buyers, providing up to a $7,500 tax credit. But under the Trump administration, that program ended, so anyone who bought an electric vehicle after Sept. 30 was no longer eligible. 

EV sales slowed dramatically after the program ended. Electric vehicle sales during the first quarter of this year accounted for only 13.7% of new vehicle registrations, the lowest since late 2021, according to the University of California, Davis’ Institute of Transportation Studies, and EV sales fell 27% year over year nationwide. 

“None of this is a surprise,” the study said. “The Trump administration spent 2025 methodically dismantling the policy scaffolding that supported electric vehicles.”