Newsom promises California EV rebates if Trump administration kills federal tax credit
California Gov. Gavin Newsom announced Monday that the state would renew a rebate program for electric vehicles if the incoming Trump administration eliminates the current federal tax credit.
Newsom said in a press statement he is proposing a new version of the state's Clean Vehicle Rebate Program, which began in 2010 and ended in 2023. The program, which began as a $5,000 rebate for electric vehicle purchases that eventually increased to $7,500, helped fund more than 594,000 vehicles and saved more than 456 million gallons of fuel, according to the governor's office.
The program would be funded by the state's Greenhouse Gas Reduction Fund, which is paid for by polluters under the state's cap-and-trade program.
"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. "We're not turning back on a clean transportation future — we're going to make it more affordable for people to drive vehicles that don't pollute."
Trump's promise to end EV tax credit
President-elect Donald Trump repeatedly vowed during his campaign to eliminate the federal tax credit for electric vehicles, which he attempted to do during his first term. The EV tax credit was expanded during President Joe Biden's administration as part of the Inflation Reduction Act of 2022. The program allows buyers to lower the purchase price of an electric, plug-in hybrid or fuel-cell vehicle by up to $7,500 for a new vehicle and up to $4,000 for a used one.
The average sale price for a new electric car last month was $56,902 compared to $48,623 for a gas-powered vehicle, according to Kelley Blue Book.
While Mr. Trump cannot eliminate the tax credits without Congress amending the law or passing a new one, his transition team intends to eliminate it as part of a broader tax-reform measure, according to Reuters.
Potential impacts of eliminating the EV tax credit
Tesla founder Elon Musk, who poured millions into Trump's campaign and landed a position in the incoming administration that will advise on spending priorities, supports eliminating the EV tax credit and stands to profit from it.
"Take away the subsidies, it will only help Tesla," Musk posted in July on his social media platform X.
The elimination of the EV tax credit would lead to a drop in prices and initially cut into Tesla's profits. However, lower EV prices would also increase losses for legacy automakers still losing money on EVs and trying to get a firmer footing in the EV market. If traditional automakers cut back on EV production to stem the losses, EV shoppers would have fewer options, which could benefi Tesla.
The oil and gas industry, which also donated to the Trump campaign, also supports killing the EV tax credit as well as Trump's plan to roll back other Biden administration clean energy initiatives such as wind and solar power subsidies.
In October, the Alliance for Automotive Innovation urged lawmakers to retain the tax credit as U.S. manufacturers vie with Chinese EV production. Earlier this month, the Zero Emission Transportation Association on Friday called on Trump to reconsider eliminating the credit, saying it has bolstered employment in states that voted Republican.
A special session to "Trump-proof" progressive policies
Earlier this month, Newsom announced that he and lawmakers were working to "Trump-proof" the state's progressive policies ahead of a second Trump presidency, calling for a special legislative session to fortify California's laws on climate change, reproductive rights and immigration, among other policies.
The session, scheduled for Dec. 2, will also call on the Legislature to authorize more funding to fight federal challenges to the state's policies. During Trump's first term, California sued his administration more than 120 times.
Newsom's announcement Monday also comes after voters this month defeated Proposition 30, which would have increased taxes on multi-millionaires to pay for electric car rebates and fight wildfires. Newsom opposed the measure, calling it a trojan horse and a way for rideshare companies to have taxpayers pay for transitioning their fleets to electric vehicles ahead of the state's move away from gasoline-powered vehicles.
California regulators voted to ban the sale of most gas-powered cars by 2035 and require rideshare drivers to drive the majority of their miles in electric vehicles by 2030. The state's ban is the first such ban worldwide and could prompt other states to implement similar rules.