California to launch $3,500 instant EV rebate to replace defund federal tax credit

LOS ANGELES - California is launching a new $3,500 instant rebate program for first-time electric vehicle buyers, stepping in to fill the void left after the federal government eliminated its $7,500 plug-in tax credit. 

What we know:

Governor Gavin Newsom and state legislative leaders have agreed on a budget deal that allocates $135 million toward a new EV incentive program.

The discount will be available immediately at purchase to buyers and lessees, instead of waiting to apply for a tax credit later. 

The program is restricted to California residents who are first-time EV buyers, "as confirmed by a buyer attestation," according to the bill outlining the program. 

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The rules establish strict price caps: a qualifying new EV's manufacturer-suggested retail price cannot exceed $50,000, and a used EV cannot sell for more than $25,000. 

However, a major loophole dictates that these price caps will not apply to vehicles manufactured by California-based EV brands, such as Rivian and Lucid.

The backstory:

The federal EV tax credit officially ended on Sept. 30, 2025, following legislation pushed through Congress by President Donald Trump. 

This followed a pledge Governor Newsom made nearly two years prior, shortly after the 2024 presidential election, to introduce state-level credits if the federal incentive was terminated. 

What's next:

As California finalizes its program, car shoppers in other parts of the country may see similar initiatives emerge. According to the California Air Resources Board, 17 states have adopted at least part of California's clean car regulations in recent years, meaning multiple states could choose to replicate this localized rebate framework.