California is moving to restore state-level incentives for electric vehicle purchases following the early expiration of the federal EV tax credit, a step that could help cushion declining demand for electric cars in the country’s largest auto market.
The federal $7,500 tax credit was ended at the close of the third quarter after the White House administration moved to terminate the subsidy ahead of its original 2032 timeline under the Inflation Reduction Act. With the federal program halted, responsibility for supporting EV adoption has shifted to individual states, placing California at the forefront of replacement efforts.
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Governor Gavin Newsom’s latest state budget proposal sets aside about $200 million for clean vehicle subsidies, reviving an earlier plan to offset the loss of federal support. The funding could provide a boost to EV makers such as Tesla, which relies heavily on California sales and has faced signs of slowing momentum.
Before its expiration, the federal incentive had been widely used, with monthly payouts estimated at around $200 million, contributing to concerns that the program placed conventional internal combustion engine vehicles at a competitive disadvantage. The end of the credit, alongside federal efforts to challenge California’s emissions mandates, has raised worries about a compounded setback for electric vehicles.
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State regulators, including the California Air Resources Board, have signaled that California intends to continue advancing its climate and clean transportation policies despite reduced federal backing. The proposed subsidy program remains subject to approval by state lawmakers, with budget negotiations expected to continue ahead of a July deadline.
Source: Bloomberg