Can Newsom Thaw His Relationship With Automakers? $200 Million Might Help.

California's relationship with Detroit is still frosty after automakers helped kill the state's electric vehicle rules — but Gov. Gavin Newsom is betting that some cold hard cash will help warm them up.

Newsom’s plan to balance the budget, released Friday, sets aside $200 million to prop up a new incentive program for electric vehicle buyers to help replace the $7,500 federal tax credit that the Trump administration eliminated last year.

It could help bolster the EV market, which industry analysts anticipate will soon start to flag in the face of rising car prices. But it could also help get automakers back to the negotiating table.

“We need to see the details of the new program, but this is a policy that has worked in the past,” said John Bozzella, president and CEO of the Alliance for Automotive Innovation, which represents most major automakers and successfully lobbied congressional Republicans to kill California's nation-leading EV sales mandate in June. “At this stage of the transition and given current market conditions, consumer incentives can lead to more EV adoption and affordability in California — and support the automotive and battery industrial base across the country.”

Yes, automakers overwhelmingly opposed California’s vehicle emissions rule, which had required them to sell an increasing proportion of EVs each year. But they also weren’t pleased with Trump’s dismantling of Biden-era incentives for car buyers and battery manufacturing. (See Bozzella’s reference to “current market conditions,” which also includes the administration's ongoing tariff policy.)

That dynamic opens a window in forthcoming negotiations on the proposal, which finance officials left vague and said they plan to hash out by February, that could thaw Newsom’s relationship with car companies — and keep the state’s climate goals on track — as he terms out of the governor’s mansion and looks towards higher office.

While Newsom has reserved his most pointed criticism for General Motors CEO Mary Barra, whom he’s repeatedly said in recent months “sold out” California, he hasn’t been afraid to issue barbs to the industry as a whole.

“Republicans rolled that back this year under Donald Trump's leadership,” he said in September, referring to the lost EV mandate. “But the American automobile manufacturers allowed that to happen.”

Automakers are eager to engage as the state hammers out the details. Among the unanswered questions are who would qualify for the incentive and if there will be a cap on the price of EV models that are rebate-eligible. Companies like Rivian and Hyundai already weighed in during a series of California Air Resources Board workshops last year, advocating for a simple-to-use rebate without an income requirement.

“In our view, every $1,000 leads to a bump in EV registrations in the state,” Tom Van Heeke, Rivian’s senior policy adviser, said in November. “People respond to incentives.”

Newsom's open hand to automakers has environmentalists split, with some taking a realpolitik approach.

Katelyn Roedner Sutter, California state director at the Environmental Defense Fund, said the state should work closely with the automakers to design an incentive program that gets more EVs on the road — and bury the hatchet in the process.

“I think this is a real opportunity for partnership,” she said.

Not all enviros are thrilled with the idea of handing the keys over to automakers.

Bill Magavern, policy director at Coalition for Clean Air, said he’s encouraged by the inclusion of EV funding in the budget, but that incentives need to target low-income drivers who are more likely to need help covering the cost. And he recoiled at the idea of car manufacturers taking the leading role in designing the program.

“Now that they have bitten the hands that fed them, are they really expecting a handout?” Magavern said. “The program design should be based on what's good for Californians, especially those who are struggling to make ends meet, and not be based on what's good for large auto companies.”

One thing that Newsom’s budget omits: Incentives for zero-emission heavy-duty trucks, which the state has also lost the authority to mandate and which have a disproportionate impact on greenhouse gas emissions and pollution. While the governor’s budget last year included a $132 million boost for a popular EV truck and bus incentive program, he didn’t include new funding this year.

Trucking fleets and manufacturers argued during a November workshop that those incentives — which are typically snatched up the same day California opens applications — are the most important tool for transitioning to cleaner models.

“We need to make sure these trucks are at the same price as the diesel equivalent when they open their paychecks and they justify the purchase of that truck,” said Chris Brown, head of government affairs at Harbinger Motors, which builds electric delivery trucks in Orange County.

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