Electric vehicles face a ‘pretty dreadful year’ in the U.S.

The key factor that nudged Dan McGrath and his wife to lease a Hyundai Ioniq 5 SUV in August was the impending end of a $7,500 federal tax credit available to people who get a new electric vehicle.

“We knew that with the Sept. 30 deadline, it was now or never, so we did it,” said McGrath, 38, who works as a transportation planner in Cincinnati. “The car became much more affordable with the tax credit.”

Across the country, thousands of people have been making the same calculation, leading to a surge of electric car sales. In August, sales jumped 18%, to 146,332 vehicles, and analysts expect another big increase in September.

But the demise of the tax credit will probably bring the party to an end. Sales of electric models are expected to plummet in the last three months of the year and then remain sluggish for some time.

“Next year could be a pretty dreadful year for EVs in this country,” Adam Jonas, who covers the auto industry at Morgan Stanley, said this month at a conference hosted by his firm.

Bracing for this new environment, automakers are slowing production of battery-powered cars, delaying or scrapping new models and shifting capital and other resources into gasoline and hybrid vehicles.

It all marks a stark turnaround from the heady days a few years ago when many automakers believed electric vehicles were poised to take off.

This new era of lower sales is largely a result of policy changes made by President Donald Trump and Republicans in Congress who have long opposed subsidies for electric vehicles.

Republican lawmakers have also suspended penalties for automakers who fail to hit federal fuel-economy targets, and Trump has raised tariffs on imported cars.

All of those changes mean that manufacturers are now under much less pressure to sell more electric models. And since most automakers other than Tesla are not yet making money on these cars, lower sales should also mean smaller losses.

Still, most industry executives believe electric vehicle sales will eventually grow again, especially if automakers can deliver models that sell for around $30,000.

Analysts from J.D. Power recently noted that electric vehicle sales fell sharply in Germany and Canada after those countries ended subsidies in December 2023 and January 2025 but eventually started growing again. A similar pattern could play out in the United States.

This article originally appeared in The New York Times.