California is evaluating a new incentive programme for electric vehicle buyers as it seeks to offset the impact of the loss of U.S. federal tax credits, with state regulators outlining proposed funding criteria tied to a planned $200 million budget allocation.
Governor Gavin Newsom’s office included the funding proposal in its 2026/27 draft budget released in mid-January. The plan, which is still undergoing legislative review, would establish a new state-level EV incentive scheme following the federal government’s decision to end tax credits for electric vehicles last year.
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The California Air Resources Board (CARB) has now outlined the programme’s expected priorities. Under the proposal, automakers would be required to participate by matching state incentive funding, similar to previous subsidy structures used in other markets. The incentives would apply to both new and used battery-electric vehicles, subject to a cap on eligible vehicle prices.
Eligibility would be restricted to first-time buyers or lessees of zero-emission vehicles, excluding consumers who already own or lease an electric car. “Limiting eligibility to first-time ZEV buyers helps expand the market by introducing new consumers to ZEV technology,” a CARB spokesperson said, as reported by InsideEVs. “Research shows that once consumers make the switch to ZEVs, they typically don’t go back to dirty gasoline or diesel vehicles.”
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CARB said the incentives would be offered instantly at the point of sale, allowing buyers to avoid paying the full purchase price upfront before receiving support.
The move comes as California, governed by Democrats, continues to clash with federal policy under President Donald Trump. The state has long enforced stricter vehicle emissions rules than federal standards, helping to drive one of the highest electric vehicle adoption rates in the United States. Last year, however, federal actions blocked California’s planned 2035 ban on new internal combustion engine vehicles and curtailed several state-level emissions regulations.
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California is also responding to the federal government’s decision to scrap EV tax credits in September 2025, which removed a $7,500 incentive for new electric vehicles and a $4,000 credit for used models. State and industry data show that EV sales in California and across the U.S. have declined since those credits expired.
The proposed programme would follow the Clean Vehicle Rebate Project, which ran from 2010 to 2023 and contributed about $1.49 billion toward the purchase of roughly 586,000 vehicles. Newsom has previously indicated that any new incentive scheme could exclude Tesla, citing the political involvement of its chief executive Elon Musk.