The Federal EV Tax Credits Are Over, So Now What?

From the headlines you might think the EV era was over. The early withdrawals of the $7,500 federal tax credit has been painted as the demise of the battery electric car industry. Sales are predicted to plummet, models are being delayed or canceled and auto companies are reviving internal combustion engine models and hybrids.

But those headlines don’t tell the whole story. 

First, there was an incredible rush to buy EVs prior to the end of the $7,500 tax credit, which illustrates the appeal of electric cars. Cox Automotive said 438,000 EVs were sold in the third quarter of the year, taking 10.4% of the automotive market for the first time. EVs also have been cited as the main reason for a boost of overall car sales over the past several months. The Los Angeles Times reported national EV sales in July jumped 19% compared with a year earlier. In Southern California’s conservative Orange County, 32% of all new vehicles sold were electric. The market leader in EVs, Tesla, set an all-time sales record in the third quarter of 2025.

Stephanie Valdez Streaty, director of industry insights for Cox Automotive, told me there are several reasons to believe any drop-off in EV sales may be short-lived for several reasons.

More affordable EVs coming

Electric cars are more expensive than gasoline-powered models, averaging more than $9,000 than comparable gas models. Stephanie said new models coming online shortly may help close that gap, including the reduced price Tesla Model 3 and Model Y and the new Chevy Bolt, which will sell for less than $30,000.

The redesigned Nissan Leaf also just hit the market at $30,000. Other low-cost models are coming. In addition, she noted that the used EV market will be getting a boost from cars coming off short-term leases of past couple years. More than 50% of EVs are leased; historically, EVs coming off lease have substantially reduced prices. Those models could provide an additional incentive-free boost.

Stephanie also said market research by Cox showed 65% of buyers interested in EVs still planned to buy even without the federal tax credit. In addition, 74% of current EV owners said they intended to buy an EV for their next vehicle. 

For current models and new ones coming, Stephanie added that advances in batteries could enhance performance while reducing costs.

More market incentives

Along with new, lower-cost models, automakers are reacting as they would to any market shift. Hyundai dropped the price of its best-selling EV, the Ioniq 5, by up to $10,000. Lucid said it would continue to honor a $7,500 discount for its new Gravity SUV. GM and Ford have suggested they may have a workaround to maintain low-cost leases for EVs. 

Even as automakers shift their immediate market strategies, anyone playing in the world market (which is all of them) will need to keep active in EVs. China and Europe are both continuing to move toward full electrification, so long-term competitiveness dictates that the EVs will keep getting better. 

The EV future still looks quite bright.   

About the author

Michael Coates is an internationally recognized expert on automotive environmental issues. He publishes the Clean Fleet Report (https://cleanfleetreport.com/), writes for a variety of publications and also consults in the automotive industry.