EV Sales Drop 41% as Federal Tax Credit Ends: "The Market Just Stopped"
The September Rush
Chris Bendel of Colchester, Vermont, finalized his purchase of a 2025 Chevy Equinox EV on September 28th, just two days before the federal tax credit expired.
"I'd been thinking about it for months," Bendel said. "But when I realized I had less than a week to save $7,500, the decision got a lot easier."
He wasn't alone. Electric vehicle sales hit record highs in August and September 2025 as buyers rushed to beat the deadline.
Then the market collapsed.
The January Crash
In January 2026, U.S. electric vehicle registrations fell 41% to 59,802 units compared to the same month a year earlier, according to S&P Global Mobility data. Market share dropped from a peak of 12% in September 2025 to just 6% in January. Every month since the tax credit expired has seen year-over-year declines.
The federal EV tax credit — worth up to $7,500 for new vehicles and $4,000 for used ones — ended on September 30, 2025, under the One Big Beautiful Bill Act. The program, which had been scheduled to run through 2032, was terminated early.
Automaker Carnage
The impact has been severe. Ford's battery-electric vehicle sales dropped 70% year-to-date. Honda's fell 81%. Kia's declined 52%, Hyundai's were down 23%, and Chevrolet's dropped 55%. Meanwhile, gasoline vehicles gained market share, rising to 76.6% of sales. Hybrid sales also grew, reaching 14.7% of the market.
Electric vehicle inventory reached 168 days supply in early 2026, compared to the typical 60 days considered healthy. Dealerships that had stocked up on EVs expecting continued demand now face significant carrying costs.
Dealer Struggles
Jesse Lore, founder of Green Wave Electric Vehicles in New Hampshire, experienced the shift firsthand. In mid-September, as customers rushed to claim the tax credit, he found himself carrying the cost of rebates while waiting for IRS reimbursement.
"We're continuing to pay the tax credit, though with a lot of anxiety," Lore said.
The IRS owed his dealership tens of thousands of dollars in pending rebates as the program wound down.
Battery Plant Layoffs
The tax credit's end has rippled through the supply chain. In March 2026, SK Battery America announced layoffs affecting 958 workers — 37% of its workforce — at its Georgia battery plant. The company cited slower electric vehicle demand as production schedules were reduced.
Global Split
Global markets show stark differences. In Europe, where government subsidies continue, EV sales increased 21% year-to-date through February 2026. North America saw a 36% decline. China experienced a 26% drop after reinstating purchase taxes.
Stephanie Valdez Streaty, director of industry insights at Cox Automotive, said 2026 would be challenging.
"The industry is trying to find that natural demand," she said.
The New Reality
Industry analyst Karl Brauer noted the market is experiencing a "shakeout to the new reality." Without the federal tax credit and reduced emissions penalties, automakers face pressure to adjust pricing. Some manufacturers responded with temporary incentives — General Motors offered dealer stock incentives, Hyundai announced price reductions — but these programs haven't offset the loss of the federal credit.
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The September deadline created a clear pull-forward effect. Buyers compressed their timelines to capture the credit. Now, with those sales completed, the market faces reduced demand. For buyers who missed the deadline, a $7,500 credit on a $50,000 vehicle represented a 15% discount. Without it, EVs must compete on total cost of ownership alone.
The auto industry is adjusting its electrification timelines. Some manufacturers have delayed new models or pulled back production targets. Over 6.5 million electric vehicles are now on U.S. roads, but the question remains:
"Where's the natural demand without the subsidies?"
