President Donald Trump’s tax and spending bill, signed into law in July, ends a federal tax credit for electric vehicle purchases, and the Sept. 30 deadline to claim the credit might have helped spur EV sales.
They hit a record of 9.9% of total vehicle sales last month, up almost one percentage point from July. An estimated 146,332 EVs were purchased, a new quarterly record, according to Cox Automotive’s Kelley Blue Book Report for August.
“The current surge in EV sales is being driven by product innovation, motivated dealers, and an urgency ahead of the IRA tax credit phase-out,” says Stephanie Valdez Streaty, a senior analyst for Cox Automotive, in the report.
Why We Wrote This
The Biden administration promoted a tax credit for electric vehicle purchases in part as a way to reduce climate-warming emissions. President Trump is ending the credit, hoping to boost fossil fuels. The next move is up to consumers.
The Biden administration promoted the tax credit, part of the 2022 Inflation Reduction Act, as a way to make EVs more affordable and accessible, help reduce the emissions that contribute to climate change, and pave the way for the United States to become a key player in the growing EV market.
People who bought new electric vehicles could claim a credit up to $7,500; people who bought used EVs could claim up to $4,000. The credit comes with income guidelines, detailed by the IRS.
The Trump administration says ending the credit is intended to “promote true consumer choice” and moves the U.S. away from “ill-conceived” policies that favor EVs. The White House says it wants to boost the oil and gas industry, support a traditional auto industry, and reduce government spending.
Where is the EV market headed?
Several states have EV consumer incentives, and manufacturers such as Tesla urged consumers to buy before the federal incentive ends. Anyone who makes a payment on a vehicle before the deadline can claim the credit, even if they don’t yet have possession of the vehicle itself.
Hyundai, Ford, and Lucid offered deals to clear inventories, deals for free home charger installation, and financing incentives, respectively.
EV sales are expected to dip after the credit ends, experts say, and automakers are preparing for a market slowdown come October. Experts suggest automakers might offer discounts and leverage leases in response.
EV prices “may even be lower than today if the car companies already have more production planned or queued for 2026 than what the demand will be,” says Gil Tal, director of the Electric Vehicle Research Center based at the University of California, Davis.
Ben Prochazka, who leads a group that advocates EV adoption, says the end of the tax credit won’t derail automakers’ focus on the vehicles, in part because they’ve already invested so much in the market.
“It’s just a question of how long it’s gonna take before they hit this sort of mass adoption phase,” says Prochazka, executive director of Electrification Coalition.
Dr. Tal says he’s concerned that the end of the federal tax credit will hurt the EV market.
“Without incentives and, more importantly, without supply-side regulations from California and the federal government, the share of EV sales will not grow every year, and most cars on the road will continue to emit high levels of [greenhouse gases],” he says.
On the international front, the U.S. is falling behind, says Kara Kockelman, a professor at the University of Texas, Austin. China has become the new global powerhouse for manufacturing EVs, producing an estimated 12.4 million in 2024, representing more than 70% of the global production.
“China has taken off and they are manufacturing really competitive, low-cost vehicles,” Dr. Kockelman says. Those vehicles could attract buyers in the U.S. market.
In 2024, U.S. automakers produced about 10.6 million vehicles, including EVs, according to data from the International Organization of Motor Vehicle Manufacturers. That same year, there were 4 million electric vehicles on U.S. roads, making up 1.4% of an estimated 292 million vehicles in the United States, according to Experian Automotive.
“It’s going to be really hard for the U.S. manufacturers to compete,” says Dr. Kockelman.
How will EVs stack up now against gas-powered cars?
EVs are limited in models, sizes, and price range.
“For many years, EVs were on the high end of the price [scale], says Dr. Tal. Auto manufacturers “don’t make an equivalent to the smaller and cheaper vehicles.”
Gas-powered vehicles have lower up-front costs than EVs. Diana Furchtgott-Roth, director of the Center for Energy, Climate and Environment at the Heritage Foundation, says that EVs “tend to be for the better off,” and the incentive is used mainly by those in the “top quintile” of income.
The Congressional Research Service cited a study of tax filing data from 2009-2021 published by Severin Borenstein and Lucas W. Davis of the University of California, Berkeley. The study found that people in the top 5% of “income distribution” made up 50% of those who used the EV tax benefit, and the bottom 60% in income received less than 3% of the benefits.
EV owners also frequently have a second or third vehicle for their household. In 2024, data shows that 80% of households who have purchased an EV also own a gasoline-powered vehicle, according to Experian’s Automotive Consumer Trend Report.
EVs are commonly used for short-distance drives, and multi-car households typically use their gas-powered vehicles for longer distances.
“If there’s an EV in a lot of these driveways, there’s also an SUV or a minivan or a regular gasoline-powered car. So you can see people are using the EVs in order to get around town. And then if they want to go somewhere like Lake Tahoe, then they take their regular gasoline-powered cars,” says Ms. Furchtgott-Roth.
Though some states and the federal government have invested in charging stations, there are still “charging deserts” across the U.S., making public access to stations limited for users.
There are an estimated 75,000 charging stations throughout the U.S., according to a study by Congress. However, the American Petroleum Institute, a fossil-fuel trade group, says there are nearly twice as many gas stations nationwide.
