A recent spike in demand for electric vehicles ahead of soon-to-expire federal tax credits has led Connecticut to lower some of its own incentives for car buyers, officials said this week.
The Department of Energy and Environmental Protection announced on Thursday that it would lower its standard rebate for purchasers of new EVs and plug-in hybrids from $1,500 to $500, due in part to what officials said was a more than 30% increase in demand for the rebates before federal tax credits expire on Sep. 30.
During a virtual meeting with reporters and public stakeholders Thursday, DEEP Commissioner Katie Dykes said the sudden spike in demand had forced the agency to begin “rationing” its incentives to ensure the ongoing fiscal health of the Connecticut Hydrogen and Electric Vehicle Purchase Rebate program.
“The budget that we have for the CHEAPR program is finite,” Dykes said. “We’re trying to be good stewards of that money.”
The new, lower standard rebates will take effect Aug. 1. The state’s “Rebate+” incentives, which are available to certain prequalified low- and moderate-income buyers, will remain the same for the time being, DEEP said.
Federal tax credits are expiring as a result of Republicans’ tax and spending plan, the One Big Beautiful Bill Act that President Donald Trump signed on July 4. The law ended tax credits of up to $7,500 for new EVs and up to $4,000 for used vehicles.
While DEEP did not immediately provide data on the number of state rebates that have been requested or approved since the federal law took effect, automakers have been publicly pushing customers to take advantage of the tax credits before they go away.
Tesla — which cannot sell its cars directly to buyers in Connecticut — recently published a banner advertisement on its website about the expiring tax credits, urging customers to “Take Inventory Now.”
The company did not immediately respond to a request for comment Friday.
Barry Kresch, the president of the EV Club of Connecticut, said that while he understood DEEP’s rationale for lowering its incentives, the move comes at a precarious time for the industry. Nationally, EV sales are expected to hit a slump later this year after the expiration of the tax breaks, he said.
“I’m sad to see the reduction of the incentive, because I think it was effective,” Kresch said. “Hopefully it can come back, depending on how the market looks.”
The number of EVs in Connecticut has quadrupled since 2020, but still only account for about 2.7 % of registered vehicles in the state. Despite the limits on direct sales, Tesla cars are by far the state’s most popular brand of EVs, followed by Toyota, Jeep and Chevrolet.
Oliver Johnson, a sales manager at Toyota of Stamford, said his dealership has experienced a slight increase in interest in the automaker’s EV lineup — led by the plug-in hybrid RAV 4 — since the new law went into effect. The dealership typically sells under a dozen EVs a month, he said, meaning the bump resulted in about three to four additional sales.
Johnson said that customers in the market for EVs are well aware of the deadline. “Everyone knows about it,” he said.
Since launching in 2015, the CHEAPR program has issued more than 21,000 rebates worth over $42 million, according to DEEP. The program is funded through a fee assessed on new vehicle sales and registrations.
This year’s standard rebate was already reduced in January from last year’s maximum of $2,250, due to strong demand. It had previously been set to drop again in August, to $1,000, prior to DEEP’s announcement of further cuts on Thursday. (Rebate+ incentives for new vehicles previously been expected to increase as part of the August changes, before being held flat).
In its announcement on Thursday, DEEP said officials would work with the CHEAPR Board to discuss potentially increasing incentives again to meet demand following the expiration of the federal tax credits in September.