California has decided to counter the discontinuation of federal electric vehicle purchase subsidies by launching its own initiative — a new ₹2.9 lakh ($3500) rebate exclusively for first-time EV buyers. The scheme is scheduled to commence later this summer.

Governor Gavin Newsom revealed the incentive on Monday, July 13, following his approval of Senate Bill 168. This legislation establishes California’s new Zero Emissions Vehicle (ZEV) instant rebate programme, allocating $135.5 million from the 2026–2027 state budget to fund rebates for first-time EV purchasers. Automakers taking part in the scheme will contribute an equivalent amount, creating a total fund of $270 million. This initiative forms a key component of California’s larger ₹4,980 crore ($600 million) investment in the ZEV ecosystem.

Addressing a press conference, Newsom stated, “Donald Trump is doing everything possible to pollute our air and hand over the clean car industry to China on a silver platter. California is pressing the accelerator. Through our new instant rebate scheme for electric vehicles, we’re enabling families to drive clean, breathe clean, and save more money. As California leads the global transition toward clean mobility, our message is clear — no one can stop Californians from choosing vehicles that are better for their wallets and for the air they breathe.”

Under this new scheme, buyers will receive an instant ₹2.9 lakh ($3500) reduction on the price of new electric vehicles priced up to $50,000, applied directly at the dealership. Additionally, used EVs priced up to $25,000 will qualify for a ₹1.45 lakh ($1750) rebate. Any first-time ZEV buyer residing in California will be eligible. However, some plug-in hybrid owners seeking to switch to a fully electric vehicle might not qualify, as certain PHEV models fall under the ZEV category under California law.

California had offered EV rebates until 2023 and had spent $1.49 billion over ten years to support around 5.86 lakh electric vehicle purchases. According to Reuters, EVs represented 20% of all new car sales in California last year, with Tesla accounting for nearly half of that share. With the passage of S.B. 168, California is further investing $600 million in clean mobility, including $150 million for the Community Air Protection Programme and $19.8 million for low-income consumers through the Clean Cars 4 All initiative, in addition to promoting EV adoption.

The decision to cap the rebate eligibility at $50,000 for new EVs is viewed as a targeted approach to make electric mobility more accessible for middle-income households. Governor Newsom emphasised that the programme aims to help families ready to shift to electric propulsion. The current market offers several qualifying EVs under this price ceiling, including the Chevrolet Bolt, Tesla Model 3, and Hyundai Ioniq 5. However, those looking to purchase premium models like the Porsche Taycan will not be eligible for this rebate.