Federal Incentives End Today – What Happens to EV Sales Now?

Car dealers across the country have been busy writing up new orders for battery-electric vehicles in recent weeks, shoppers racing to take advantage of federal tax credits that expire on Sept. 30. But what happens come October 1? Will demand wither away? Headlight.News has more.

The salespeople at Suburban Ford in Ferndale, Michigan have been busy writing up orders for the automaker’s two retail battery-electric vehicles, the Mustang Mach- and F-150 Lightning, these past few weeks, one pausing for just a moment to say demand has been “far stronger” than it was earlier in the year.

That scene was repeating itself across the country on Tuesday, shoppers – and dealers – racing to complete purchases before federal EV tax credits of up to $7,500 end on Sept. 30. Research shows those incentives helped drive up demand for battery-electric vehicles which topped 600,000 for the first half of 2025 and are expected to set a record for the third quarter, driven by the rush to claim tax credits.

While EV sales and market share are widely expected to reach all-time highs in September, the big concern is what happens come October 1, especially considering the fourth quarter is expected to begin with well over 130,000 battery-electric vehicles sitting on dealer lots across the U.S. Some observers fear a sudden plunge in demand – but not everyone. With a flood of new, low-cost models set to start rolling out in the months ahead, the downturn could be surprisingly brief, several told Headlight.News.

End of the line

There’s little doubt that federal tax credits played a critical role in helping boost EV sales eightfold between 2019 and 2023, with demand this year expected to reach or exceed 1.2 million, according to most forecasts.

But the incentive program has gone through big changes over the last several years. As part of the Biden administration’s infrastructure bill, only select models qualified for tax credits of up to $7,500, largely based on where the vehicles, their batteries and key materials were sourced – though the revised incentives also set limits on both the price of a vehicle and the income of a buyer.

Now, as part of the federal spending bill passed by the Republican=controlled Congress last July, the givebacks expire on September 30, 2025. The Trump administration did provide a slight, last-minute reprieve for buyers who couldn’t find the exact vehicle they wanted on dealer lots, however. As long as they complete a binding sales contract by the end of the day they can take delivery later.

“Payback” is coming

The rush to take advantage of expiring tax credits saw EV sales hit an all-time high in September, said Tyson Jominy, senior vice president of data and analytics for J.D. Power, “and this month should surpass that,” he added, forecasting the EV share of the U.S. new vehicle market will reach the mid-11% range.

But what happens come October? Expect heavy “payback,” warns Jominy, a concern echoed by many other analysts There’s been a big “pull-ahead” of EV sales that would otherwise have occurred in the fourth quarter. Where sales were averaging about 300,000 a quarter over the past year, Jominy said, demand could dip below 200,000 during the final three months of this year.

“I’m not saying EV sales are going to collapse,” said Sam Abuelsamid, lead data analyst with Telemetry Research, but automakers are likely going to have to amp up their own incentives to keep potential buyers motivated.

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Just in time: a flood of affordable EVs

Expect EV sales “to flatten considerably” over the next several years, warned Ed Kim, CEO of AutoPacific, Inc. A recent consumer study found as many as a third of potential EV buyers could back out of the market without the federal tax credits. With those incentives in place, AutoPacific forecast a year ago, the battery-electric market share would reach 25% by 2029. It now forecasts the share will hold flat at 8% for all of 2025, growing to just 12% by 2029.

Not everyone is quite so glum. Power’s Jominy still sees the EV market share reaching 20% — or higher – by 2030. And while he’s not quite that optimistic, Abuelsamid thinks the big downturn likely to follow next month won’t last that long. “By mid-2026 we could see some recovery as new models come out,” he explained.

Many automakers have been paring back EV programs – Nissan, for one, is pulling its midsize Ariya from production in 2026, while Stellantis has killed plans for the all-electric Ram REV pickup. But, if anything, there’s an increased emphasis on low-end products, such as the third-generation Nissan Leaf, the all-new Kia EV3 and revived Chevrolet Bolt, all entering the market at or under $30,000 without incentives.

“Still optimistic”

If anything, that could bring in a wave of first-time EV buyers, experts agree. It could also see some shoppers choose to move down a bit in the market segment, say, opting for the more affordable Kia EV3 rather than the larger, more lavishly equipped EV6. If anything, there could be a “reduction in demand” in the mid-price EV segment, models currently running between $50,000 to $75,000, said Abuelsamid.

As for the luxury segment, he foresees little change in demand since electric vehicles over $80,000 generally didn’t qualify for federal tax credits, anyway.

For his part, analyst Jominy said he is “still optimistic” about the EV market long-term. And one reason is the large base of EV owners already in the market. Existing owners are “far more loyal” to the technology than motorists who own vehicles using internal combustion engines, Power data shows. So, when it’s time to trade in, “They’re going to come back to the market and only buy EVs.”