California Governor Gavin Newsom is proposing $200 million in new state-funded electric-vehicle tax rebates after Congress earlier this year ended a federal $7,500 tax credit for new EV purchases, state officials said on Friday.
The proposal follows the expiration of the federal incentive on Sept. 30, 2024, after which U.S. electric-vehicle sales fell sharply in the final three months of the year. Legislation approved by Congress also eliminated a $4,000 federal tax credit for used EVs, removing a key incentive for lower-cost electric vehicle adoption.
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In late 2024, Newsom said that if federal incentives were rolled back, California would seek to revive a version of the state’s Clean Vehicle Rebate Program, which ended in 2023. That program spent $1.49 billion over roughly a decade to subsidize about 586,000 vehicles, according to state data.
The California Air Resources Board (CARB) said it is not yet clear how much the proposed rebates would amount to on a per-vehicle basis, or how eligibility would be structured if the funding is approved by lawmakers.
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The proposed state incentives come as automakers adjust to a weaker EV demand environment following the end of federal subsidies. Stellantis, the parent company of Chrysler, said on Friday it will stop selling its plug-in hybrid Jeep Wrangler and Grand Cherokee models in North America. General Motors said on Thursday it would take a $6 billion charge related to scaling back certain electric-vehicle investments.
Federal policy changes have also reduced other incentives that states previously used to encourage EV adoption. Effective Oct. 1, the federal government barred states from allowing electric vehicles and other clean cars to use carpool lanes without meeting standard vehicle occupancy requirements, ending a long-standing perk in California and several other states.
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President Donald Trump has taken a series of steps affecting EV policy since returning to office, including signing legislation in June to block California’s electric vehicle sales mandates. In July, the administration told automakers that a newly signed law would eliminate penalties for failing to meet federal fuel-efficiency standards dating back to the 2022 model year.
The administration has also moved to reduce compliance costs for automakers by changing rules that previously required companies to purchase regulatory credits from Tesla and other manufacturers to meet emissions and efficiency requirements, changes that analysts say could save the industry billions of dollars.
California lawmakers are expected to debate the proposed rebate funding as part of the state’s broader budget discussions.
Source: Reuters
