California Hits Brakes on EV Subsidies, Citing Budget Deficit
Governor Newsom's reversal on replacing the $7,500 federal credit redirects funds to charging infrastructure, creating headwinds for automakers.
The electric vehicle sector is facing potential headwinds in its largest US market after California Governor Gavin Newsom confirmed the state will not replace an expiring federal tax credit, a significant reversal driven by budgetary pressures.
The decision means the when it expires, a move that could dampen consumer demand and slow vehicle sales for major automakers. Governor Newsom cited the state's substantial budget deficit as the primary reason for walking back a previous commitment to offset the federal incentive's discontinuation.
This policy shift follows the recent closure of the state's long-running Clean Vehicle Rebate Project (CVRP). Instead of funding direct consumer rebates, the state now plans to , a move intended to address range anxiety and support long-term EV adoption.
The announcement has drawn criticism from the automotive industry, with companies like Rivian and Volkswagen having lobbied for a state-level replacement to maintain sales momentum. In a related development, Governor Newsom , accusing the automaker of undermining California's climate goals. While the broad-based incentives are ending, some programs aimed at lower-income buyers, such as the Driving Clean Assistance Program (DCAP), will remain in place.