Californians purchased a record number of plug-in hybrid and zero-emission vehicles in the third quarter of 2025, taking advantage of their last opportunity to claim federal tax incentives before they were eliminated under President Trump's sweeping budget cuts.
California residents purchased more than 124,700 zero-emission or plug-in hybrid vehicles between July 1 and Sept. 30, marking the highest quarterly sales of clean vehicles since the state began tracking those numbers in 2008, according to the California Energy Commission. Electric vehicles and long-range hybrids accounted for 29% of new car sales statewide, capturing the largest quarterly market share in that 17-year span.
Consumers rushed to dealerships to take advantage of expired Biden-era tax credits, which offered up to $7,500 toward the purchase or lease of new hybrid or zero-emission vehicles. Incentives were vital in making electric vehicles more affordable, given that their batteries had been primarily made from expensive rare earth minerals, driving up sticker prices compared to gasoline-powered vehicles.
Now, for the first time in more than a decade, electric vehicles must compete with their gasoline cars without government-funded rebates. Although the model range of electric vehicles has expanded and prices have become more competitive, they remain $5,000 to $10,000 more expensive than comparable gasoline models, raising concerns about whether California will maintain momentum on its clean car goals.
“Most of the major brands our dealers represent have one or more electric vehicles available today, and many more in the pipeline,” said Brian Maas, president of the California New Car Dealers Association, which represents more than 1,200 franchised new car dealers across the state. “So electric vehicles are here to stay. The question is, at what level of sales?”
The top five counties with the highest share of electric vehicle sales were all in the Bay Area. Santa Clara, where nearly 47% of vehicle sales were hybrid or zero-emissions, led the way. Electric vehicle sales were also high in Orange and Los Angeles counties, accounting for nearly 36% and 31% of total auto sales in the quarter, respectively.
Tesla remained by far the best-selling electric vehicle brand in California.
But its third-quarter sales of this year fell nearly 7% compared to the same period in 2024. The big winners appear to have been Honda and Volkswagen, whose sales of zero-emission vehicles in California more than doubled year over year; Audi was not far behind, with a sales increase of 90%.
Ford also did well, posting record domestic sales of its electrified Mustang Mach-E and F-150 Lightning, of which more than 15% were sold in California.
Maas said he anticipated “excellent” sales in the third quarter with the imminent demise of the federal tax credit, which allowed for a more than 10% rebate on most electric vehicle models. But many of them were “impulse” sales, purchases by consumers who would have bought later if not for the expiration of federal incentives.
Many American auto companies, including Ford and General Motors, have reported forecasting future declines in electric vehicle sales, citing changes in federal policy.
Maas is part of a chorus of industry experts who tend to agree.
“I think any economist expects there to be a decline,” he said. “It's unclear how much of a drop that will be. Dealers have been trying to determine what the natural level of non-credit EV sales is, and they're trying to align their inventory to reflect that.”
Jessie Dosanjh, president of California Automotive Retailing Group, operates 20 dealerships in Northern California selling numerous brands, including Chevrolet, Nissan, Acura, Toyota, Infinity, Ford and Hyundai. In August and September, Dosanjh said, dealerships were more crowded than usual with customers looking for electric vehicles. He advised his employees to inform customers that if they ever considered purchasing an electric vehicle or hybrid, they had a limited time frame to get the best price.
“It's an absolutely significant amount of money, especially if you look at the leases,” Dosanjh said. “It's a couple hundred dollars [a month]on average.”
Even with record quarterly sales, this year's overall sales are still slightly behind those of 2024.
A spate of tariff announcements, mixed economic forecasts and political backlash against Tesla CEO Elon Musk contributed to the decline in electric vehicle sales in the first half of the year, experts say.
Environmental deregulation and divestment by the Trump administration have shaken market expectations for electric vehicle sales.
In addition to ending federal tax credits, the Trump administration and federal lawmakers opted not to reauthorize a law that gave electric vehicle drivers nationwide the privilege of driving alone in the shared lane, a popular benefit for avoiding congested roads. Trump also signed a law repealing federal waivers that allowed California to require automakers to sell an increasing percentage of zero-emission vehicles to dealers across the state, starting with 35% of all new vehicle sales in 2026.
Regulatory changes have caused dealers to reconsider the composition of vehicles on their lots.
“If I were a betting man, I would say demand for electric vehicles will drop by several percentage points,” Dosanjh said. “To what extent, I don't know. I don't think those consumers will necessarily not buy a car. I think they will see a shift towards more hybrid vehicles that provide some of the benefits, in terms of range and economy. And I also see consumers considering perhaps cheaper internal combustion engine vehicles.”
Gov. Gavin Newsom had previously promised to restore a state program that provided up to $7,500 to buy clean cars if Trump canceled federal tax credits. However, while answering questions from reporters at the bill signing ceremony on September 19, Newsom walked back that commitment.
“We cannot compensate for the federal vandalism of those tax credits,” Newsom said. “But we can continue to make unprecedented investments in infrastructure, as we are doing.”
The governor's press office did not respond to a request for comment on his change of position.
California Lawyer. Gen. Rob Bonta is suing the federal government to reinstate California's zero-emission vehicle regulations. Meanwhile, state regulators are soliciting ideas for new ways to encourage electric vehicle adoption.
The good news is that the state's innovative policy and environmentally-minded residents have already left a lasting mark on the industry, said Adrián Martínez, director of the Right to Zero campaign at Earthjustice, a San Francisco-based environmental nonprofit.
California's clean air policy is already largely responsible for driving automakers to add nearly 150 electric vehicle models to their lineups, a far cry from the 20 designs on the market in 2012. The state is approaching 2.5 million zero-emission, long-range hybrid vehicles sold since 2008, a testament to the demand for cleaner cars, Martinez said.
“There is a lot of pessimism out there, mainly because we are seeing efforts at the federal level to anchor our electric vehicle industry in this country,” Martínez said. “But a lot of money, effort and time has been invested into developing electric vehicle markets. And it would be crazy for these companies to simply give in to these federal pressures and stop selling the cars that consumers want.”
Maas, president of the California Automobile Dealers Association, largely agreed. Electric vehicles have become a fixture in California. But auto dealers will learn more about how self-sufficient they can be in the coming months.
“I think the long-term future is that electric vehicles will continue to sell well, especially in a state like California,” he said, “but maybe not as well as some originally expected.”
