New EV sales expected to decline now that tax credits are cut

The elimination of federal EV purchase and lease subsidies is expected to slow U.S. EV adoption, with analysts forecasting a decline or plateau in sales following a rush to utilize vanishing incentives. Automakers are adjusting production targets while focusing on developing more affordable models, as evidenced by Ford's plans for a $30,000 electric pickup by 2027. Consequently, major research firms like BloombergNEF and Cox Automotive have significantly reduced their 2030 EV sales forecasts, indicating that the pace of transition will now be primarily driven by market forces such as continuously declining battery and production costs rather than government incentives.

Analysis

The abrupt termination of U.S. federal EV subsidies, including credits up to $7,500 for new vehicles, marks a significant shift in the electric vehicle market, with the transition's pace now primarily dictated by market forces rather than policy. Analysts uniformly expect a near-term sales decline or plateau after a consumer rush to capture the expiring incentives. EV sales, which constituted roughly 10% of the U.S. market in August, are projected by Cox Automotive to hover below this level for the remainder of 2025. In response, automakers are revising production targets downward but are strategically pivoting toward long-term affordability to stimulate demand. Ford, for instance, is proceeding with the development of a lower-cost platform, targeting a $30,000 electric pickup for 2027. Consequently, long-term forecasts have been sharply curtailed; BloombergNEF has slashed its 2030 U.S. EV sales outlook to 27% from the high-40s, while Cox Automotive now sees a 25% mix by 2030, well short of a previously envisioned 50%. The transition now hinges on the industry's ability to achieve what ING analyst Coco Zhang terms "continuously declining battery and production costs," a dynamic further complicated by potential regulatory loosening by the EPA.

Key Decisions for Investors

• Investors should anticipate near-term revenue headwinds and potential inventory buildup for automakers heavily reliant on U.S. EV sales, as the end of federal subsidies is expected to cause a sales plateau through 2025.
• Differentiate between automakers by focusing on those with clear, funded strategies for developing lower-cost EV platforms, as their ability to drive market-based adoption will be a key performance indicator in a post-subsidy environment.
• Monitor progress on battery and production cost reductions, as these are now the primary catalysts for long-term growth, rather than federal policy.
• Re-evaluate exposure to the broader EV supply chain, including battery and mining companies, as the significant downward revisions to 2030 sales forecasts by major analysts imply a slower demand trajectory.