INFOGRAPHIC: US EV market poised for demand downturn after credit repeal

The largest electric vehicle incentive in the US is set to expire on Sept. 30, bringing a cooling of the nascent market that saw explosive growth in recent years and forcing manufacturers to reconsider their strategy.

As the end of the federal $7,500 tax credit approaches, EV sales are spiking, according to initial estimates from Cox Automotive. US EV sales reached a record in August and might set an all-time sales record in Q3 2025, according to a Sept. 10 report by Cox.

"The current surge in EV sales is being driven by product innovation, motivated dealers, and an urgency ahead of the IRA tax credit phaseout," said Stephanie Valdez Streaty, Cox Automotive analyst.

A similar pattern can be seen in the Canadian EV market. Canada's federal EV incentive program ran out of funds at the start of 2025, but just before it ended the country saw a record-breaking streak of sales in Q4 2024. This trend was also visible in Germany and Norway.

But even before this demand spike, the US EV market already showed signs of slowing. The market contracted in June for the first time since September 2024, dropping 6%, S&P Global Commodity Insights analysts say.

Commodity Insights forecasts the US EV sales market share to reach 21% in 2030 and 74% in 2050, which is down from 24% and 80% in the 2024 outlook, respectively.

"The political landscape continues to significantly impact the EV market as OEMs, car dealers and consumers alike struggle to keep up with changing regulations," the analysts said in the Aug. 27 EV Essentials report. "Ultimately, states will adopt EVs at vastly different rates, with some pro-EV state governments likely to provide stopgap incentives."

Tesla, the largest EV seller in the US by far, scrambled to deliver as many vehicles as possible before the tax credit expires amid ongoing supply challenges, executives said. The company pushed back its plans to roll out a cheaper model to focus on "building and delivering as many vehicles as possible in the US before the EV credit expires," Tesla CFO Vaibhav Taneja said.

CEO Elon Musk noted that the company benefits from EV incentives in other parts of the world despite US credits ending.

Ford Motor Company, which is losing money on its EVs, could have "some uplift ... on a financial basis" if US EV sales drop and the company shifts its production to meet demand, CFO Sherry House previously said.

"If we were to pull back some of our US EV production, most likely, you would be moving that into other areas. ... So maybe you'd be leaning a little bit more heavily into Europe, where the mix and the contribution margin is stronger or moving into ICE products," House said.

General Motors CEO Mary Barra noted the company saw EV demand before the Inflation Reduction Act introduced the $7,500 EV tax credit. She said the tax credit repeal would reveal consumer sentiment on EVs by 2026.

"We think there is going to be an EV market that will grow over time, albeit it will start lower and potentially grow more slowly," Barra said.

Swedish EV company Polestar recently reported a strong H1 2025, emphasizing its focus on the European market while downplaying its future investments in the US. CEO Michael Lohscheller said the US market is important, but said the financial exposure for growing in the US is "too high."

Other overseas manufacturers also shared concerns about shifts in the US market this quarter. Nissan recently announced that it would push back the production timeline for two new EVs planned for US production. Honda also said it is reviewing the timing of new product launches after delaying a C$15 billion investment in North American EV infrastructure.