The recent surge in US electric vehicle (EV) sales, while impressive, was primarily an artificial boom driven by the impending expiration of a key federal tax credit, and the US continues to lag significantly behind global leaders in EV adoption. The momentum is now expected to reverse as the industry grapples with the loss of the incentive.
The recent US EV “boom”
The third quarter of 2025 did show strong performance in the US EV sector, but this growth was heavily influenced by temporary policy changes:
- Subsidy-Driven Sales: Record-breaking performance from manufacturers like General Motors and a high EV market share of 10% in August were attributed by analysts and executives to a “dash to buy” before the $7,500 federal tax credit expired at the end of September. The subsidy helped offset the high price of EVs, which averaged over $57,000 in August.
- Executive Warning: Automakers are preparing for a sharp slowdown. Ford’s CEO expects the industry to be “smaller, way smaller than we thought,” and GM’s CFO anticipates a “precipitous” drop-off in demand now that the incentive is gone.
- Scale of Growth: While annual battery-powered car sales topped 1.2 million last year (a five-fold increase in four years), this growth is now on shaky ground.
Global EV adoption disparity
Despite the recent gains, the US – the world’s second-biggest car market – is still a laggard compared to other major regions, highlighting the comparative weakness of its adoption rate:
In smaller markets like Norway and Nepal, take-up is even greater, and growth in emerging markets across Latin America, Africa, and Asia is surging.
Policy and price challenges
The core reasons for the US lag, and the expected post-subsidy slowdown, stem from key policy differences:
- Weaker Government Support: Analysts cite comparatively weak government support as a major headwind in the US, limiting the comprehensive subsidies, trade-in programs, and firm rules seen in Europe and China.
- High Price Tag: EVs in the US still cost significantly more than comparable petrol-powered vehicles. The loss of the $7,500 credit is a major setback for affordability.
- Tariffs and Protectionism: High tariffs on foreign cars, particularly those from Chinese makers like BYD known for low prices, have effectively shut out affordable models that have spurred adoption elsewhere.
- Uncertain Future: Policy uncertainty, including the potential rollback of emissions rules and the removal of incentives under a different administration, is expected to further reduce industry investments and make the road ahead “hard,” according to industry analysts.
The short-term sales spike masked a fundamental vulnerability in the US market, which is now facing a significant test of its resilience as crucial government support is removed.
