Governor Newsom Vows To Keep $7,500 ZEV Tax Credit if Axed By Trump Administration

In a statement on Monday, Governor Gavin Newsom announced that, should President-elect Donald Trump keep his promise and remove the federal $7,500 zero-emission vehicle (ZEV) tax credit, he would help create a successor version of the state Clean Vehicle Rebate Project (CVRP) to make up for it.

Between 2016 and 2023, California had the CVRP, which helped discount over 594,000 electric vehicles in the state at a cost of $1.49 billion. During this time, Governor Newsom also established many programs to create an eventual switchover from gas-powered vehicles to electric vehicles, including the 2035 ban on new gas powered cars being sold in California. For a while these measures worked, with the California Energy Commission finding last year that 25% of all new cars sales in California are electric. ZEV truck sales were also two years ahead of schedule percentage wise. This was only bolstered by the federal tax credit, giving buyers an additional $7,500 off electric vehicles.

However, consumer demand for electric vehicles have plummeted since mid 2023. Nationally, electric car sales have been tanking, with AAA finding that the number of Americans looking into buying electric cars went down from23% last year to 18% this year. Many buyers have been opting for a middle ground of hybrids, with hybrid sales increasing so much that many dealers have wait times for them at 6 months or more, while electric vehicles litter lots. The same can be said for California where electric car sales and newly registered electric cars have been going down each quarter since Q3 2023.It has gotten so bad that the state will now likely not reach its 35% of all car sales being electric by 2026 milestone now for Newsom’s 2035 plan. In Q3 2024, electric car sales have continued to remain stagnant at 26.4%.

Adding more chaos to the fire is that the state CVRP expired last year, with California banking on the federal tax credit to keep up electric car sales. But with the incoming Trump administration currently planning to remove the federal tax credits, which are worth up to $7,500 per car, California could be looking at even fewer electric cars being sold, ruining the 2035 plans and other electric vehicle plans.

With all of this on the line, Governor Newsom vowed on Monday to create a new version of the CVRP program should Trump eliminate the federal tax credit. The proposed California rebates, which would include changes to promote innovation and competition in the ZEV market, could come from the Greenhouse Gas Reduction Fund, which is funded by oil companies under the state cap-and-trade program.

A possible return of the California tax credits

“Consumers continue to prove the skeptics wrong – zero-emission vehicles are here to stay,” said Newsom on Monday. “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. 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.”

However, what wasn’t noted was what the cost of such a state program would be. While the CVRP cost $1.49 billion over 8 years, a successor version could cost the state even more. And while such a program would yearly only be a small fraction of the overall state budget, many have charged that the rebate would only benefit those who were already looking at buying electric vehicles, with gas-powered vehicles still being an overall cheaper option, as well as more practical, for most consumers in the state, even with a rebate.

“The state switching over to electric cars, that whole plan, has been Newsom’s baby,” explained Veronica Deer, an auto industry analyst who focuses on the electric market, to the Globe on Monday. “He wants that to be a legacy of him. And it is in danger. Electric car sales, like you pointed out, have hit a ceiling in California. People have accepted hybrids just fine. But charge times, issues with getting charges when low, battery problems, and a lot of other factors have been keeping them low. Cost is a big one.

“Remember, the 2035 gas powered car sales ban isn’t a sure thing still. It’s not set in stone. Trump has promised to undo each state’s plan for that. To keep it alive, Newsom needs those higher numbers to show that he is reaching milestones. And the federal rebate going away would hurt the already bad situation even more. Look at them promote the charging network. That is desperation.

“Electric cars are the future. That’s for sure. But we need to have the technology get there to get people interested. We did that with hybrids. Newsom isn’t doing the smart things and waiting to get the consumer and technology one-two punch. And who knows how much it will cost the taxpayer.”

As of Monday afternoon, the incoming Trump team has yet to respond to Newsom’s statement.