EV sales just hit a new record in the U.S.: This month, they’re on track to make up 12.2% of new car sales, according to J.D. Power and Associates. Meanwhile, gas car sales dropped compared to the same month last year.
Buyers are racing to get new electric vehicles before the $7,500 federal tax credit goes away on September 30. When the Trump administration pushed to eliminate the credit in the One Big Beautiful Bill Act, it inadvertently helped nudge some consumers to switch to EVs earlier that they otherwise might have.
“There’s nothing like a deadline to get people paying attention,” says Josh Boone, executive director of Veloz, a nonprofit focused on electrifying transportation. The organization has seen a surge of traffic on its digital platform that helps consumers choose an EV.
The end of the credit also helped temporarily push EV prices down. In August, the average transaction cost for an EV was $44,908—a little less than the average gas vehicle, at $45,521. That’s because manufacturers added generous incentives to help sell cars before the deadline.
The tax credit has been in place since 2008, under the Bush administration. Now that it’s disappearing, EV sales are likely to plummet next quarter. Automakers are slowing production and canceling some models. But electric cars aren’t dead in the U.S., and sales are still likely to grow next year.
How much does the tax credit matter?
Even though the end of the incentive has spurred sales, the tax credit generally hasn’t been the deciding factor for most buyers, says Loren McDonald, who runs an EV data and analysis firm called Chargeonomics. “I’ve always believed that its importance has been overplayed,” he says. “For most people, it was more of a discount than it was an actual incentive to get people over the hump.”
Most people using the tax credit have had higher incomes, and probably could have afforded the vehicles on their own. That’s still the case now. “For a lot of people, if they’re considering the difference of a $50 or $100 a month payment, it’s like ‘I can deal with that,’ he says. “What it means is that people with lower income brackets still aren’t interested.”
In a recent survey with Morning Consult, analysts at Cox Automotive found that 65% of respondents who were in the market for a new EV said they would still consider an EV without the tax credit. “I thought that was a good data point to show that it’s important, but not for everyone,” says Stephanie Valdez Streaty, director of industry insights at Cox.
The number of affordable EVs keeps growing
As EV production scales up and battery costs fall, that helps push cost down. The number of more affordable models is growing. The next-generation Chevy Bolt will enter production later this year. The new Nissan Leaf will start at just under $30,000, with a 300-mile range. Slate Auto, a startup backed by Jeff Bezos, will release an electric truck in the mid-$20,000s next year. (With the tax credit in place, it would have been less than $20k.) Toyota is releasing a new electric C-HR next year. Volvo has said that its new crossover, the EX60, is aiming to get as close as possible to price parity with gas cars.
In China, it’s worth noting, EVs are already cheaper than gas cars without subsidies. Plug-in vehicles now make up more than half of new sales in China, with battery electric vehicles alone representing one-third of the market.
Technology continues to improve. CATL, the largest EV battery manufacturer, plans to soon release new sodium-ion packs that cost $40 per kilowatt-hour, 20% less than its current lithium iorn phosphate batteries (which are already cheaper than standard lithium-ion batteries). Automakers are increasingly adopting platforms that support multiple EV models, boosting economies of scale. All of this will help, although automakers are also facing headwinds from tariffs.
If you consider the total cost of ownership, many EVs are already less expensive than equivalent gas vehicles. They need less maintenance, and charging is cheaper than buying gas. Still, that’s harder to communicate than the sticker price.
“The auto industry needs to start educating buyers to be more like fleet buyers, which is they get out their Excel spreadsheet and they calculate the total cost of ownership of the truck over the lifetime,” says McDonald. “They need to do this with electric vehicles. The problem is, if you’re also selling gas vehicles, you’re basically selling against your own cars. And that’s always been one of the problems with the legacy automakers: if they go too far in selling how great EVs are, they’re basically saying, sorry, [gas cars] aren’t that good.”
The number of used EVs is also continuing to grow—1.1 million EVs were leased over the last few years and will soon be available for resale. The upfront cost of a used EV is already typically comparable (or cheaper) than an equivalent gas car. Those sales have also been surging.
Some state and utility incentives are also still available. All of this means that even without the tax credit, the cost of EVs may not necessarily be a large barrier. Charging infrastructure is also improving, and the average range of an EV is already big enough that range anxiety isn’t the challenge that it used to be.
Automakers will need to get better at marketing
As the tax credit goes away, automakers may have to rethink marketing. McDonald argues that car brands have overrelied on incentives and rebates from the government and utilities. “They’ve focused on all these incentives—not that it’s a really great car, and it doesn’t require maintenance, and it’s fast, and convenient,” he says. “My hope is that they’re going to do a better job marketing and targeting.”
One automaker he recently spoke with said that the brand is now beginning to target likely buyers, such as suburban families with a large garage and income. “They’re finally waking up and realized that doing Super Bowl ads is a waste of time,” he says. “What you really need to do is target the people who are considering a Tesla, and get them to buy yours.”
Automakers may continue to offer strong incentives next quarter to help offset the loss of the tax credit. “I think they’ll step in and offer more now,” says Tyson Jominy, senior vice president of data & analytics at J.D. Power. (GM declined to comment on its plans for this story, and Rivian said that it is still working through its incentive plans.)
Sales are likely to drop, and then rebound in 2026
EV sales will probably fall steeply in the fourth quarter, and likely the first quarter of 2026. That’s both because some sales that would have happened then happened early, and because other sales will be lost because the tax credit is no longer available.
But they’re expected to pick up again later in 2026. The same pattern has happened in other countries that phased out EV tax credits. In Germany, for example, the share of EV sales temporarily spiked to 22% just before the German subsidy went away at the end of 2023. At the beginning of 2024, they dropped by more than half. But sales then started to rebound, and by this summer, had grown to 16.8% of the market. In Canada, a federal EV incentive was paused at the beginning of 2025. Sales spiked beforehand, dropped, and are now starting to grow again.
JD Power expects that EV sales for this year will be around 9% of the total car market, similar to last year, and will grow in 2026 as new models arrive. Long term, analysts still expect steep growth over the rest of the decade, despite changes in policy.
“As we go throughout [2026], and certainly as we head toward the end of decade, we are still bullish on EVs overall,” says Jominy. “We do expect there to be a lot of new launches and expect the technology to continue to improve and evolve.”
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