California is moving to revive electric-vehicle demand after the federal government eliminated the clean-vehicle tax credit that had offered eligible buyers up to $7,500.

Governor Gavin Newsom has signed legislation creating the MyFirstEV Zero Emissions Vehicles instant rebate program, which will provide California residents with a $3,500 rebate when they purchase their first new electric vehicle priced below $50,000. Buyers of qualifying used EVs priced below $25,000 can receive a $1,750 rebate.

The program is backed by $135.5 million from California’s latest state budget, with participating automakers expected to provide another $135.5 million. Unlike the former federal tax credit, the California incentive is designed to be delivered at the point of purchase, potentially making the savings more immediate for consumers.

The program also contains an unusual advantage for California-headquartered automakers. Companies based in the state, including Rivian and Lucid, are exempt from the $50,000 vehicle-price ceiling. Their higher-priced EVs can therefore qualify for the incentive if buyers meet the other eligibility requirements.

Tesla, meanwhile, faces a different situation. Although the company was founded in California, it moved its headquarters to Texas. As a result, Tesla vehicles remain subject to the $50,000 price limit under the new California program.

The new rebate arrives as US automakers confront weaker EV demand and a federal policy shift favoring continued dependence on conventional vehicles. California is now betting that targeted financial incentives can help keep consumers moving toward electric transportation.