The decision to lease a Hyundai Ioniq 5 last August was a no-brainer for Dan McGrath and his wife, primarily because a generous $7,500 federal tax credit was about to expire. “We knew that with the Sept. 30 deadline, it was now or never, so we did it,” shared McGrath, a 38-year-old transportation planner from Cincinnati, highlighting how the credit made their electric SUV significantly more affordable.
This sentiment resonated with thousands nationwide, fueling a last-minute surge in EV purchases. August alone saw an impressive 18 percent jump in sales, reaching 146,332 vehicles, with September expected to show similar strong numbers. However, this electric vehicle “party” is likely over. Industry analysts predict a sharp decline in sales for the final quarter of the year, followed by a period of sustained sluggishness.
Adam Jonas, an automotive industry expert at Morgan Stanley, grimly forecast that “Next year could be a pretty dreadful year for E.V.s in this country.” This somber outlook has automakers rethinking their strategies, with many slowing down battery-powered car production, postponing or canceling new EV models, and reallocating resources back towards traditional gasoline and hybrid vehicles. This marks a dramatic shift from just a few years ago when the industry was buzzing with optimism about the rapid ascent of electric cars.
The primary driver behind this downturn is a series of policy changes spearheaded by President Trump and Congressional Republicans, who have consistently opposed government support for electric vehicles. Trump, known for dismissing climate change as a “hoax” and labeling his predecessor’s green initiatives as a “green new scam,” has influenced policies that ease pressure on automakers to prioritize EVs. These changes include suspending penalties for failing to meet federal fuel-economy standards and imposing higher tariffs on imported cars. Consequently, manufacturers now have less incentive to push electric models. Since most automakers (Tesla being a notable exception) aren’t yet profiting from EVs, reduced sales ironically translate to smaller financial losses. This shift means a renewed focus on gasoline-powered cars, including increasingly popular hybrids that blend internal combustion engines with electric motors and batteries.
General Motors is a prime example of this strategic pivot. Paul Jacobson, GM’s chief financial officer, recently stated at an investment conference that the company is moving its focus from simply increasing EV sales and expanding its electric model lineup to significantly cutting the production costs of these vehicles. “The reality is we’re probably going to scale up much slower now over the next few years,” he explained. “But we’re in a position now where we have the opportunity to deploy the capital into electric vehicles not to proliferate the portfolio, but rather to focus on structural cost reductions within E.V.s.” This recalibration has already led to GM idling its Hamtramck, Michigan, factory (which produces several electric models) this month. Another plant in Tennessee is slated for production suspensions in the coming months, followed by a reduction to a single shift starting in January.
Other major manufacturers are following suit. Honda has shelved an electric Acura project, Stellantis has canceled its battery-powered Ram pickup, and Nissan is discontinuing imports of its Ariya electric SUV from Japan. Ford Motor, facing annual losses in its EV division amounting to billions, is now re-evaluating its approach. The company plans to introduce several new, more affordable electric models, though not until 2027, with an ambitious target of a new electric pickup priced around $30,000, substantially lower than its current offerings.
While legacy automakers can pivot back to internal combustion engines and hybrids, newer EV-focused companies like Tesla and Rivian face a more formidable challenge without a gasoline-powered fallback. They also stand to lose a significant revenue stream: selling emission credits to older manufacturers. For years, companies like GM, Stellantis, and BMW purchased these credits from EV producers to meet federal clean-air mandates. These sales have been a major profit driver for Tesla, contributing $439 million to its $1.2 billion quarterly profit in the second quarter alone.
Despite the immediate headwinds, a majority of industry leaders foresee a rebound in electric vehicle sales eventually, especially if manufacturers can deliver appealing models in the $30,000 price range. Analysts at J.D. Power point to similar market behaviors in Germany and Canada, where EV sales initially dipped after subsidies ended but subsequently resumed growth. This trend suggests a potential recovery path for the U.S. market. Albert Gore III, executive director of the Zero Emission Transportation Association, emphasized the enduring appeal of EVs: “They’re ultramodern, and they’re fun to drive. Some manufacturers have decided to scale back their pace, but I think those who continue to bring compelling, affordable E.V.s in high volume will be richly rewarded.”