Newsom challenges Trump on electric vehicle tax credits

California will step in and provide rebates to eligible residents who buy electric vehicles if President-elect Donald Trump ends the $7,500 federal EV tax credit, Gov. Gavin Newsom said 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,” Newsom, a Democrat, said in a statement. “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.”

Newsom’s proposal comes as California officials gird for an extended battle with the incoming Trump administration over environmental policy, immigration and other issues. As he did during his first term, Trump is expected to try once again to block California’s authority to set auto emissions limits that are stricter than federal standards.

Already, Newsom has called a special session of the California Legislature for December, in part to discuss an increase in funding for litigation. During Trump’s first term, California sued his administration more than 120 times.

“The American people reelected President Trump by a resounding margin giving him a mandate to implement the promises he made on the campaign trail, including stopping attacks on gas-powered cars,” spokesperson Karoline Leavitt said in a statement. “When he takes office, President Trump will support the auto industry, allowing space for both gas-powered cars and electric vehicles.”

Trump cannot unilaterally eliminate the electric vehicle tax credits, which are part of the Inflation Reduction Act of 2022. Congress would have to amend the law or pass a new one to erase the credits. But his transition team has indicated that the president-elect wants the credits gone.

Under the law, consumers can lower the purchase price of an electric, plug-in hybrid or fuel-cell vehicle by up to $7,500 for a new vehicle and up to $4,000 for a used one. There are some restrictions, including income ceilings, for those who qualify.

The average sale price in October for a new electric car was $56,902 compared with $48,623 for a gas-powered vehicle, according to Kelley Blue Book.

Electric vehicles became symbolic of President Joe Biden’s climate agenda, and therefore a prime target for Trump and Republicans. The growth of electric vehicles also poses a threat to the oil and gas industry, which donated heavily to Trump’s presidential campaign.

Newsom said that if Trump eliminated the credit, the governor would propose restarting a rebate program that California had for zero-emissions vehicles from 2010 to 2023. The structure of the program changed over time, but began with a $5,000 direct-to-consumer rebate for battery electric vehicles that eventually increased to $7,500. It helped fund more than 594,000 vehicles and saved more than 456 million gallons of fuel, state officials said.

The governor also cannot act unilaterally; the state Legislature would have to agree to restart the rebate program. Although California’s state budget is among the nation’s largest, its revenues tend to be volatile. Lawmakers struggled to cover a shortfall this year.

A new rebate program may exclude Tesla and some other automakers, a spokesperson for the governor said. That’s because Tesla already has a significant share of the market in California, and the program is designed to spur market innovation and competition, the spokesperson said. Those decisions would be subject to negotiations with the Legislature.

Last week, the state’s nonpartisan fiscal adviser said that the budget was now “roughly balanced,” but warned that “this year’s budget does not have capacity for new commitments.” Funding for a revived rebate would most likely come from the state’s “cap and trade” program, in which industrial polluters buy and sell emissions credits. That fund has generated as much as $5 billion a year and has been used to underwrite an assortment of climate programs, from wildfire prevention to high-speed rail.

As it has in the past, the California Air Resources Board would most likely set the terms of any new rebate program, including what the rebate amount would be, whether it would apply to all makes of vehicles and whether there would be income restrictions.

California has been a leader in electric vehicle adoption. The top five cities in the United States with the highest numbers of registered electric vehicles have all been in California.

In 2023, electric vehicles accounted for more than 30% of auto registrations in the San Francisco Bay Area, according to S&P Global Mobility, which provides data analysis to the automotive industry. In Los Angeles, that number was close to 25%. This year, California surpassed 2 million zero-emissions vehicles sold.

Those numbers are set to grow; California is requiring that by 2035 all new cars and light trucks sold must be zero-emissions vehicles. By the same year, half of all new heavy trucks sold in the state must be electric.

The suggestion that the federal tax credit is fleeting has motivated some potential buyers to act.

Clio Bavalee, who lives near Santa Cruz, said she and her husband decided a few months ago to buy a hybrid car after theirs broke down. They have a Nissan Leaf but want a larger hybrid sedan they can take on road trips in remote areas where they may need to use gas.

Bavalee, 67, who works for Hewlett-Packard, said the couple would typically spend months researching cars to buy. But now they’re racing to pick something before Inauguration Day.

“The clock is ticking because we feel like these rebates are what has made the difference for us to be able to buy the EVs,” Bavalee said. “The fear that these rebates will go away is making it so that we’re really under pressure to figure out and buy.”

Alvin Shin, the president of the Tesla Owners East Bay car club, has been telling members for weeks that if they are planning to buy another EV, now is the time.

“If they are going to make a decision, they should make it by the end of the year,” Shin said. “Better now than the unknown.”

Shin said that the 2,000 members of the Tesla car club have for days been discussing in their private Facebook group the possibility that the credit could be rolled back, a particularly hot-button issue given Elon Musk, who owns Tesla and is an adviser to Trump, wants the credit killed.

Christopher Bowe, a senior manager at FedEx who lives in Hayward, California, received a $7,500 federal tax credit and $2,000 in state credits when he bought a Ford F-150 Lightning in 2022. The rebates made it possible for Bowe to afford the $69,000 truck, his first electric vehicle.

Bowe and his wife, who is a schoolteacher, are planning to buy a second electric vehicle in 2026. They have set their sights on a new Rivian SUV, expected to be released that year, to replace their 11-year-old gas-powered SUV. Without the federal rebates, Bowe worries he won’t be able to fit the purchase into his budget.

“We were counting on that federal tax rebate credit,” Bowe, 50, said. “We’re not in the position where we can easily afford these things if not for some of these programs.”

This article originally appeared in The New York Times.

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