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The US electric vehicle market is set to see a correction following the end of federal subsidies. The policy turnaround delays the uptake – but ultimately, we don't think it will change the future or the long-term direction of travel
US tax credits for electric vehicles – up to $7,500 for a new full electric EV and up to $4,000 for a used EV – ended on 1 October under the One Big Beautiful Bill Act (OBBBA). This changes the economics of driving EVs, and in turn makes them less attractive.
In August, average new EV purchase prices before tax credits stood at $57,245, still some $9,000 more than a new petrol car ($48,100). Subsidies largely filled the price gap, with almost 90% of new EV buyers in 2024 receiving the incentives.
The globally-lagging EV transition in the US will now be delayed even further, as the administration aims to relax vehicle emission reduction obligations for 2032. Industry players are cutting their production (scaling) plans accordingly, refocusing on hybrids but also continuing to invest in and develop new EV product portfolios in the background.
Share of battery electric vehicles (BEV) and plug-in hybrid electric vehicle (PHEV) in total new registrations in the US, per month
In the months leading up to the subsidy deadline of 30 September 2025, consumers rushed to secure EV tax credits, resulting in a record influx of new electric vehicles. In September, the share of new EV sales – including battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) – surged to 13% of total new light-duty vehicle sales, lifting the third-quarter average to 10.5% from 7% in the second quarter. Tesla, General Motors, and, to a lesser extent, Ford and Stellantis benefited from this surge.
However, EV sales are expected to decline during the remainder of 2025 – although thanks to front-loading, we anticipate that the full-year EV share will reach 10% (equivalent to 1.6 million units), slightly exceeding the 2024 level. Following a surge ahead of US President Donald Trump's 'Liberation Day' tariffs, it's been a tumultuous year for the US car market.
Electric vehicle sales have increased from 6.8% in 2022 to 10% in 2025 (around 1.6 million vehicles), supported by federal incentives. However, a correction following front-loading, along with waning consumer interest, is expected to push EV market share back down to around 8% in 2026. At the same time, internal combustion engine (ICE) vehicles and conventional hybrids (HEVs) are likely to gain more traction. We expect EV share to recover in 2027, but this will result in several years of stagnation, delaying the pace of electrification. The setback will widen the gap with China, where electrification is already far ahead, and also with Europe.
Incentives have been terminated and the momentum behind green considerations supporting EV sales has weakened, while carmakers are expected to recalibrate their strategies and shift advertising efforts toward conventional cars and hybrids. However, beyond the possibility of a more EV-friendly future administration, there are a few encouraging signs for the future.
While the US car market is slowing down for new electric vehicles, the secondhand EV market is gaining momentum. In August, used EV sales rose by 59% year-on-year – far outpacing the growth seen in new EV sales – and this momentum is likely to continue. Several factors are driving this trend:
Admittedly, tax credits for used EVs have also ended. However, given the limited price gap between used EVs and ICE vehicles, the impact on the secondhand EV market is expected to be much milder than on the new EV market.
Auto loan debt pressure could affect used car market
However, a growing risk for the car market in general – and the secondhand EV market in particular – is the increasing stress from auto loans. The 90+ day delinquency rate for auto loans has recently climbed to levels comparable to those seen during the financial crisis and the Covid-19 pandemic. This rise is likely driven by lower-income groups, who tend to purchase secondhand vehicles rather than new ones. While we do not expect this trend to significantly suppress overall sales, smaller lenders may become more cautious and less willing to extend car loans to lower credit score buyers in the secondhand market.
