Federal Tax Credit Expires—EV Market Braces for Shock
After a final summer surge, the U.S. electric vehicle (EV) market is heading for a sharp downturn. With the $7,500 federal tax credit expiring on September 30, 2025, analysts predict a dramatic drop in EV sales through the end of the year—and a “pretty dreadful” 2026 ahead.
Last-Minute Rush Before the Cliff
Consumers like Dan McGrath, a 38-year-old transportation planner from Cincinnati, rushed to lease EVs before the deadline. “The car became much more affordable with the tax credit,” he said. That sentiment drove an 18% sales spike in August 2025, with 146,332 EVs sold—just before the incentive vanished.
Why the Credit Disappeared
The phaseout stems from policy shifts under the Trump administration, which rolled back clean-energy subsidies and suspended fuel-economy penalties for automakers. President Trump, who has called climate change a “hoax,” labeled Biden-era green policies a “green new scam,” clearing the way for reduced EV mandates and support.
Automakers Hit the Brakes
- General Motors idled its Hamtramck, MI EV plant and cut shifts in Tennessee.
- Honda scrapped its electric Acura model.
- Stellantis canceled the battery-powered Ram pickup.
- Nissan halted U.S. imports of its Ariya EV.
- Ford delayed affordable EV launches until 2027.
EV Sales Forecast: Before and After the Credit
| Period | Estimated U.S. EV Sales | Year-over-Year Change |
|---|---|---|
| Q3 2025 (pre-expiry) | ~160,000 | +15% |
| Q4 2025 (post-expiry) | ~85,000 | -40% |
| Full Year 2026 (projected) | ~300,000 | -35% vs. 2025 |
Tesla and Rivian: No Safety Net
Unlike legacy automakers, pure EV companies can’t fall back on gas-powered profits. They’re also losing a critical revenue stream: regulatory credit sales. In Q2 2025 alone, Tesla earned $439 million from selling emissions credits—nearly 37% of its $1.2 billion profit.
Global Precedent: After Germany and Canada ended EV subsidies in late 2023 and early 2025, sales initially crashed—but rebounded within 12–18 months as affordable models arrived.
Path to Recovery
Industry experts believe the market will stabilize once automakers deliver compelling EVs under $30,000. “These are cars that people like,” said Albert Gore III of the Zero Emission Transportation Association. “They’re ultramodern, and they’re fun to drive.”
For deeper insights into federal auto policy shifts, see [INTERNAL_LINK:ev-policy-usa].
