California Governor Gavin Newsom has announced plans to reinstate a state electric vehicle (EV) tax credit if President-elect Donald Trump eliminates the federal $7,500 EV tax credit after taking office. Newsom, a Democrat and vocal critic of Republican policies, aims to revive a program California phased out in 2023 to continue incentivizing EV adoption without federal support.
Trump has criticized the Biden administration’s EV initiatives, describing them as an “EV mandate,” and is reportedly planning to roll back fuel-efficiency standards and other policies promoting clean transportation. During Trump’s first term, California clashed frequently with his administration over auto emissions regulations and the state’s right to set stricter standards under the Clean Air Act, a right he is expected to challenge again.
The Impact on Rivian
The proposed changes could have mixed implications for Rivian. Rivian’s vehicles are eligible for the $7,500 federal EV lease credit, but it’s important to note that this credit can only be applied to leases, not purchases. This makes Rivian particularly dependent on maintaining robust leasing incentives to appeal to a broader customer base.
If the federal credit is eliminated, California’s proposed state EV tax credit could help soften the blow, particularly in a market where Rivian has strong demand. Rivian vehicles carry higher price tags and incentives play a key role in making them more attainable. A new state credit could sustain Rivian’s competitive edge in California where EV adoption is among the highest in the U.S.
However, the federal credit’s restriction to leases means Rivian buyers interested in purchasing outright would face steeper financial barriers. This dynamic makes state-level credits critical for sustaining Rivian’s leasing program and encouraging direct purchases, which are vital for broader EV adoption and Rivian’s long-term success. California’s actions may set a precedent for other states to implement similar measures, helping Rivian and other EV makers navigate potential federal policy shifts.
Source: Bloomberg