California is prepared to offer state tax rebates for electric vehicle purchases if the incoming Trump administration scuttles the federal EV tax credit, according to Gov. Gavin Newsom.

“We will intervene if the Trump Administration eliminates the federal tax credit, doubling down on our commitment to clean air and green jobs in California,” Newsom said in a statement.

The money “could come from the Greenhouse Gas Reduction Fund, which is funded by polluters under the state’s cap-and-trade program,” Newsom’s statement said. That fund pays for clean transportation, sustainable housing, renewable energy, water recycling and other programs.

Any new money designated for EV rebates would have to compete with, and take money from, those other programs. Creation of an EV rebate program probably would require approval of the state Legislature.

Newsom’s statement didn’t say how much the program would cost or how the rebates would work.

Tax credits can substantially reduce the sticker price of a new electric vehicle — although whether automakers raise the sticker price on subsidized electric cars, and by how much, is known only by them.

The credits run as high as $7,500 per car or truck, but only those assembled in the United States with a certain percentage of battery and other parts made in countries with which the U.S. has trade agreements. Car dealers can get a tax credit on cars made outside the U.S. and leased to customers. They often lower the lease price to match but are not required to.

On the campaign trail, Trump promised to end the EV tax credits. He has softened that tone in recent months as Tesla Chief Executive Elon Musk has emerged as a key financial supporter and advisor. A recent study from UC Berkeley and Duke University estimated that removing the credits could cut EV demand by 27%.

Until it was phased out in 2023, California offered rebates on electric cars worth several thousand dollars, the amount dependent on family income. That program was largely funded by the Greenhouse Gas Reduction Fund, but because revenue from the cap-and-trade program was so volatile and unpredictable, EV buyers sometimes had to wait months to receive their rebates.

Any new rebate program would be a “new version” of the old one, the governor’s statement said, and “would include changes to promote innovation and competition in the ZEV market.” ZEV stands for zero-emission vehicles.

In the third quarter of 2024, according to the governor’s office, 115,897 such cars were sold or leased in California, or 26.4 % of new car registrations. (Numbers issued by the California New Car Dealers Association are slightly lower.)

Under an edict issued by Newsom in 2020, 35% of annual new car sales must be zero emission by model year 2026 and 100% by 2035. Consumers will dictate whether those thresholds are met. The edict requires automakers to sell a specific percentage of electric vehicles, but it doesn’t obligate consumers to buy them.

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