One Year Without the EV Tax Credit: A Market Reshaped

One year ago, the federal tax credit for electric vehicles expired. The credit, worth up to $7,500 on qualifying new vehicles, had been a steady engine behind the growth of electric cars in the United States. Its elimination marked a turning point, and the year since has made clear just how much that incentive had been doing.

The numbers tell a blunt story. In September 2025, the final month before the credit disappeared, electric vehicles accounted for 11.4 percent of new car sales, according to Edmunds. By October, that share had fallen to 5.8 percent. The drop was not gradual. It was a step change, and the market has not fully recovered.

Dealerships felt it first. At a Toyota store in New York, the general sales manager described the shift plainly: selling electric vehicles without the credit is harder. That experience has been common across the country. Buyers who had been on the fence found the math no longer worked in their favor. Those who were already skeptical of electric vehicles had one less reason to reconsider.

Congressional Republicans had argued for years that the credit amounted to the government picking winners in the marketplace. When they moved to eliminate it, they framed the decision as returning power to consumers and letting markets decide what Americans drive. The debate over that argument continues, but the market's response has been concrete and measurable.

The clearest beneficiary of the shift has been the hybrid vehicle. Hybrid sales are up nearly 27 percent over the past year, according to Edmunds. Two forces are driving that surge. The first is gasoline prices. At roughly $4.50 per gallon nationally, and with the US conflict with Iran adding pressure at the pump, fuel economy has become a central concern for buyers. The second is anxiety about the cost and practicality of fully electric vehicles. Hybrids offer meaningful fuel savings without the questions around charging infrastructure, range, and upfront cost that still shadow the electric market. For a large segment of buyers, that combination has proven to be exactly what they needed.

Toyota, which built its hybrid lineup over decades when few American buyers were paying attention, has benefited considerably. The company's early and sustained investment in hybrid technology has positioned it well in a moment when many consumers want efficiency without a full commitment to electric driving.

The electric vehicle market, though diminished, has not collapsed. Automakers have continued to develop and produce electric models, though several have adjusted their rollout timelines in response to the changed demand environment. The credit's disappearance did not stop the investment. It slowed the pace and narrowed the audience.

One development worth watching is the arrival of a used electric vehicle market. A significant number of electric vehicles sold during the credit era were leased rather than purchased outright. Those leases are now coming due. Cox Automotive projects that more than 300,000 leased electric vehicles will enter the used market over the coming year. That inventory could bring electric vehicles within reach of buyers who found new models too expensive, and it may gradually rebuild familiarity with electric driving in ways that don't show up immediately in new car sales figures.

Global trends are applying pressure of their own. In China, more than half of all new cars sold in 2025 were electric. In Europe, the figure exceeded 30 percent. Those markets are large enough to shape the economics of battery production and electric vehicle technology for the entire industry, regardless of what US policy does or does not do. American automakers competing in those markets cannot afford to step back from electrification entirely, even as domestic demand has softened.

The market that has taken shape over this past year is smaller and more fragmented than the one the credit helped build. New electric vehicle sales have found a floor, though where that floor holds over time remains to be seen. Hybrids have absorbed the buyers who wanted better fuel economy without the full transition to electric. A used electric vehicle market is beginning to form, drawing on the inventory the credit era generated.

What happens next will depend on factors that policy alone cannot control. Gasoline prices, which are shaped by global supply decisions and geopolitical events, will continue to influence which vehicles buyers choose. Battery costs, which have been falling for years and are expected to continue falling, will determine when electric vehicles can compete on price without assistance. And there is the quiet, accumulating influence of familiarity: as more used electric vehicles move into more driveways, more people will have direct experience with the technology, without subsidies shaping the decision.

The credit helped launch a market. Its absence has revealed how much of that market was built on the incentive rather than on unassisted demand. The next phase will show whether electric vehicles can close that gap on their own terms.

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