Instant $3,500 Rebate Approved For CA EV Buyers: What To Know

SACRAMENTO, CA — Nearly one year after the popular $7,500 federal tax incentive expired, California lawmakers are offering a substitute they hope could boost electric vehicle sales as gas prices spike due to the war with Iran.

On Thursday, the incentive was bolstered by Gov. Gavin Newsom's announcement that 13 major automakers will be teaming up with the state to offer instant rebates to Californians buying or leasing their first zero-emission vehicle.

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"While Trump hands the keys to the clean car industry over to China, we are signaling to the world that California is open for business. We're all-in on cutting costs for working families and keeping American manufacturing jobs in the fight. The future should be built in America," Newsom said Thursday.

The EV incentive went into effect July 1 under Senate Bill 168, a clean transportation law, as the state Air Resources Board finalizes its agreements with automakers and California car dealerships. The bill was passed by the state assembly on June 29.

Through the state's incentive, eligible buyers will receive $3,500 off a new electric vehicle with an MSRP of $50,000 or less, and $1,750 off used EVs priced under $25,000.

Newsom signed the $352 billion 2026-2027 state budget which includes $135 million to support first-time EV buyers' purchase of new and used electric vehicles through SB 168.

Unlike the federal tax incentive that expired in September, California car buyers will receive incentives after an instant discount instead of filing for the rebate and waiting until tax season to receive their money.

California's EV incentive is only available to first-time EV buyers. Per SB 168, eligible buyers must attest they have not previously owned an electric vehicle.

Last month, Lawrence Goldenhersh, president of the Center of Sustainable Energy, praised the legislation, saying it will add to California's history of clean transportation leadership and the impact of well-designed consumer incentives.

"California's Clean Vehicle Rebate Project proved that smart, well-designed incentives can accelerate EV adoption by making EVs more affordable," Goldenhersh said in a news release.

"Over the program's lifetime from 2010 to 2023, EV market share in California led the nation, growing from near zero to 25 percent of all new car sales. Nearly 90 percent of participants said the rebate influenced their decision to buy or lease their EV, and nearly half said they would not have made the purchase without it."

New EV sales have declined nationally after the Trump administration ended the $7,500 federal rebate and rolled back EPA emissions requirements, but used EV sales have increased in California due in part to affordability.

California leads other states with the largest percentage of electric car buyers. According to the Alliance for Automotive Innovation, EVs and hybrid cars accounted for almost 24 percent of passenger vehicle registrations in California last year, and California was the only state to retain more than 20 percent of the market share in 2025.

California officials have previously announced plans to end the sale of new gasoline-powered vehicles by 2035.