ING's Outlook on the U.S. Electric Vehicle Market in 2026: Navigating Risks and Opportunities in a Shifting Landscape

The U.S. electric vehicle (EV) market is at a crossroads in 2026, marked by a temporary slowdown in adoption and a recalibration of investment strategies. According to ING's analysis, the expiration of federal tax credits-a critical driver of early EV adoption-has pushed market share back to 8.5% in 2026, down from a record 10% in 2025. This correction, driven by front-loaded demand and waning consumer interest, underscores the fragility of policy-dependent markets. However, the long-term trajectory of electrification remains intact, with technological advancements and infrastructure growth poised to reignite momentum. For investors, the challenge lies in navigating near-term headwinds while positioning for a resilient, post-subsidy era.

Market Dynamics and Immediate Challenges

The removal of the $7,500 federal tax credit for new EVs and the $4,000 credit for used models under the One Big Beautiful Bill Act (OBBBA) has fundamentally altered the economics of EV ownership, as ING's analysis notes. With the price gap between EVs and internal combustion engine (ICE) vehicles narrowing only marginally, consumers are increasingly favoring hybrids and ICE vehicles, particularly in price-sensitive segments. Automakers like Ford and General Motors have responded by refocusing on hybrid models while maintaining long-term EV R&D commitments. This strategic pivot reflects a broader industry trend: prioritizing short-term profitability over aggressive electrification timelines.

The secondhand EV market, however, offers a glimmer of hope. As lease returns of older EV models increase and price parity with ICE vehicles improves, used EV sales are projected to grow significantly per ING's findings. This segment could become a critical growth driver, though risks such as rising auto loan delinquency rates-exacerbated by economic stress-threaten to dampen demand.

Sector Consolidation and Strategic Shifts

The U.S. EV market is witnessing a wave of sector consolidation as smaller players struggle to adapt to the post-subsidy environment. Companies like Tesla, Rivian, and Lucid, which previously relied on credit revenue to fund operations, are now under pressure to pivot to alternative revenue streams, such as software and energy services, according to a BizTech Weekly report. Meanwhile, traditional automakers are leveraging economies of scale to develop cost-effective EV models, such as Ford's $30,000 EV pickup, to maintain competitiveness-a dynamic highlighted in a GM Insights report.

This consolidation creates both risks and opportunities for equity investors. On one hand, fragmented supply chains and overleveraged startups may face liquidity crises. On the other, industry leaders with robust balance sheets and diversified product portfolios-such as Stellantis and Toyota-could emerge stronger, capturing market share from faltering competitors, as ING's analysis suggests.

Regulatory Uncertainty and Policy Volatility

Regulatory shifts remain a double-edged sword. While the Inflation Reduction Act (IRA) initially spurred domestic battery manufacturing and infrastructure investments, its future is now uncertain amid potential repeal by a unified Republican-controlled government, according to a Clean Investment Monitor report. This policy instability complicates long-term planning for automakers and suppliers, particularly as international trade tensions escalate. For instance, U.S. tariffs on Chinese EVs and battery materials-aimed at reducing dependency on China-have introduced supply chain bottlenecks and pricing volatility, as discussed in a National Law Review article.

Investors must also contend with the Trump administration's overhaul of EV regulations, which has neutralized federal credit markets and forced companies to adopt cost-effective strategies, such as hybrid technologies and domestic battery production. While that reporting highlights measures that enhance resilience, it also notes delays to the full realization of electrification's economic benefits.

Supply Chain Realignments and Infrastructure Investment

The U.S. EV supply chain is undergoing a dramatic realignment. Domestic battery manufacturing capacity now exceeds current deployment levels, with 380 clean technology facilities announced under the IRA's Section 45X tax credits, according to the Clean Investment Monitor report. However, rising tariffs and geopolitical tensions have disrupted global supply chains, prompting automakers to prioritize nearshoring and vertical integration-a trend covered in the National Law Review article.

Infrastructure investment remains a key differentiator. The IRA's focus on expanding charging networks and grid capacity is expected to drive long-term growth, with the U.S. EV market projected to expand from $139.6 billion in 2025 to $439 billion in 2034 at a 13.6% CAGR, per the GM Insights report. Investors in infrastructure equities-such as charging station operators and grid modernization firms-stand to benefit from this tailwind, though execution risks persist.

Investment Implications and Strategic Positioning

For equity investors, the path forward requires a nuanced approach:
1. Focus on Resilient Equities: Prioritize automakers with diversified product lines (e.g., hybrids, EVs) and strong balance sheets.
2. Hedge Against Policy Risks: Allocate capital to companies with exposure to the secondhand EV market and domestic battery manufacturing.
3. Leverage Infrastructure Growth: Target infrastructure plays aligned with IRA-driven projects, such as charging networks and grid upgrades.
4. Monitor Global Trade Dynamics: Position for volatility in Chinese EV exports and U.S. tariff policies, which could reshape competitive landscapes.

While the near-term outlook for the U.S. EV market is clouded by policy uncertainty and sector consolidation, the long-term fundamentals remain compelling. As ING notes, the transition to electrification is "delayed but not derailed." Investors who navigate the current turbulence with discipline and foresight will be well-positioned to capitalize on the inevitable resurgence of EV adoption.