EV Sales Face 50% Drop as US Tax Incentives Expire

Analysts have warned that the end of federal tax incentives for electric vehicles (EVs) in the United States could lead to a significant drop in sales for major manufacturers such as Tesla, General Motors, and Ford. The tax credit, part of the One Big Beautiful Bill Act, is set to expire at the end of this month, which could result in a 50% decrease in EV sales compared to current levels.

The Internal Revenue Service (IRS) has provided some flexibility for EV buyers, allowing them to receive the tax credit even if they take delivery of their vehicle after the September 30 deadline. However, once these orders are fulfilled, the depletion of EV inventory will become challenging.

An executive analyst from iSeeCars.com noted that EV sales are likely to see a slight increase or maintain a strong momentum in the third quarter as consumers rush to place orders before the September 30 deadline. However, after the deadline, sales are expected to plummet.

The analyst predicted that the market share of EVs in the U.S. could drop to below 4% immediately after the incentive expires and stabilize around 4% by early 2026. Currently, EVs hold a 9.1% market share. A report from Cox Automotive indicated that EV demand surged in August, driven by consumers rushing to purchase before the tax credit expiration, with the market share rising to 9.1% and sales increasing by 20% year-over-year, totaling over 130,000 units.

General Motors reported that its EV sales reached a monthly record in August, with over 21,000 units sold across its Chevrolet, Cadillac, and GMC brands. The company acknowledged that EV sales would likely decline in the next quarter following the tax credit expiration but expressed confidence in maintaining and expanding its market share in the long term.

Analysts suggest that automakers, including General Motors, may resort to price cuts to sustain sales momentum, potentially sacrificing profit margins. This strategy was previously employed by General Motors when it reduced the price of its Bolt EV by $7,500 after exhausting the tax credit limit.

Lucid Motors, a pure EV manufacturer, has already announced a $7,500 discount on its vehicles post-tax credit expiration to stimulate sales. Previously, tax credits were only applicable to EVs manufactured in North America, with leased vehicles being an exception, benefiting manufacturers like Hyundai, BMW, and Kia.

For domestic automakers, the loss of federal tax credits is part of a broader impact from the White House on the EV industry. The federal government is also reducing incentives for domestically produced EVs and eliminating penalties for automakers that produce gasoline-powered vehicles, which previously required them to purchase emission credits from companies like Tesla.

Analysts warn that automakers may lose the incentive to produce EVs without the combination of carrots (incentives) and sticks (penalties) that previously drove the market. The removal of these regulatory measures could further complicate the EV market landscape.