California Plans $200 Million EV Incentive Program

A State-Level Response to the Loss of Federal EV Support

California is preparing a new round of incentives aimed at electric vehicle buyers, as the state looks to offset the impact of the eliminated federal EV tax credit. According to Governor Gavin Newsom’s newly released 2026–2027 budget proposal, California plans to allocate $200 million to create a new incentive program for light-duty zero-emission vehicles.

The proposal comes months after Congress ended the long-standing $7,500 federal EV tax credit, a move that raised concerns about affordability just as EV adoption began to slow nationwide. While the state has not finalized the structure of the program, the budget signals a renewed commitment to keeping EVs financially accessible for California consumers.

What the Proposed Incentive Program Could Look Like

Details on how the new incentives would work remain limited. The budget summary does not specify eligibility requirements, incentive amounts, or income thresholds, nor does it clarify whether the program would favor new, used, or leased vehicles.

However, reporting from USA Today suggests the incentives may be applied as “on-the-hood” discounts, reducing the purchase price at the point of sale rather than reimbursing buyers later. If confirmed, this structure could address one of the most common criticisms of EV incentives: that delayed tax credits do little to help buyers manage upfront costs.

State officials have not yet provided additional clarification. Requests for comment sent to the governor’s office and the California Air Resources Board (CARB) have not received responses as of publication.

Why California Is Turning to Incentives Instead of Mandates

The proposed funding arrives at a pivotal moment for California’s clean vehicle strategy. Last year, Congress overturned the state’s Advanced Clean Cars II regulations, which required automakers to sell increasing percentages of zero-emission vehicles and aimed to phase out new gasoline-only vehicle sales by 2035.

California has challenged that decision in court, arguing that Congress lacked the authority to invalidate the rules. While the lawsuit continues, the regulations remain unenforced, leaving the state with fewer policy tools to shape the EV market in the short term.

In this context, direct financial incentives may be California’s most immediate lever for sustaining EV adoption while broader regulatory questions remain unresolved.

A Quiet Reversal From Earlier Budget Positions

The proposal also reflects a subtle shift in the governor’s fiscal stance. After the federal tax credit was eliminated in 2025, Governor Newsom initially promised that California would replace it with state-level support. That commitment was later withdrawn amid concerns over budget constraints.

Now, with a new budget cycle underway, the idea of backfilling lost federal incentives has returned, suggesting improved fiscal flexibility or renewed political urgency around transportation electrification.

Potential Impact on the Nation’s Largest EV Market

If approved by the legislature, the program could have an outsized influence. California accounts for a significant share of U.S. EV sales and operates the country’s most extensive public charging network, making it a bellwether for national adoption trends.

The incentives could help stabilize demand as automakers contend with a cooling EV market, rising competition, and pricing pressure. They may also improve access for first-time buyers who were relying on the federal credit to make EV ownership feasible.

Other states, including Colorado, Massachusetts, and Oregon, continue to offer generous EV incentives. California’s proposed program would help it remain competitive—and potentially reaffirm its leadership role—even as federal support for EVs has largely disappeared.

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