EV Sales Surge Despite Expiring Federal Tax Credits

As the U.S. federal tax credits of up to $7,500 per vehicle begin to phase out, the country has witnessed a surge in the sales of electric vehicles (EVs). In 2025, sales skyrocketed by 30 per cent, with a total of over 1.2 million vehicles sold. This surge has been fuelled by consumers racing to capitalize on the remaining incentives and auto manufacturers launching appealing new models.

Improved battery technology, expanded charging infrastructure, and shifting consumer preferences have all contributed to this milestone in the auto industry. However, there are concerns about the market’s stability and the affordability of EVs as the tax credit begins to wane. In this article, we delve into the factors that have driven the EV sales boom, the key players, and what the future might look like with lesser subsidies.

The Rush to Maximize Federal Incentives

The EV tax credit, which was established under the Inflation Reduction Act of 2022, has been instrumental in making EVs more affordable. As this program gradually phases out — expected to end by mid-2026 for most vehicles — consumers are rushing to claim their share of the credit before restrictions related to income and domestic manufacturing requirements are fully implemented.

For instance, a family earning less than $300,000 annually can still claim a tax credit of up to $7,500 on a Tesla Model Y or $3,750 on a Ford Mustang Mach-E, provided it is bought before regional phase-outs begin in Q2 2025. This urgency has resulted in record-breaking monthly EV sales, with August 2025 alone recording a sale of 120,000, according to Kelley Blue Book.

New Car Models Spur the Sales Further

Auto manufacturers are capitalizing on this rush by releasing new 2025 models. Market leader, Tesla, holding a 45-per-cent market share, has ramped up the production of the Model 3 and the Model Y, introducing a refreshed Performance version with 510 horsepower, a range of 320 miles, and priced at $54,990.

Other automobile veterans are not lagging behind. The 2025 Mustang Mach-E from Ford, priced at $39,995, boasts a range of 300 miles and a revamped interior with a 15.5-inch touchscreen. Hyundai’s IONIQ 6 sedan offers a range of 361 miles and comes with a fast charging rate of 800 volts at a price of $42,450.

New entrants like Rivian and Stellantis are also making their mark. Rivian’s low-priced R2 compact SUV, priced at $45,000, has received 80,000 pre-orders due to its 330-mile range and sporty features. Stellantis’s Jeep Recon EV, an off-road electric SUV with a 290-mile range, priced at $60,000, is attracting a whole new generation of Jeep enthusiasts.

Advancements and Infrastructure Support

Rapid expansion of charging stations and technological progress have bolstered the surge in EV sales. The U.S currently has over 200,000 publicly available charging stations, a 40 per cent rise in just one year since 2024. Battery innovations, like Toyota’s 2025 Corolla EV prototype’s solid-state battery, are promising to offer a 500-mile range by 2027.

Concerns as Tax Credits Wind Down

Despite the current EV boom, concerns loom over the potential loss of tax credits. EVs tend to be more expensive than their gas counterparts by between $5,000 and $10,000, and without subsidies, affordability may become an issue. Analysts predict a possible 10% decline in sales in 2026 if costs cannot be offset by economies of scale or state incentives.

In addition, there are supply chain constraints to consider. The introduction of tariffs on imported batteries and semiconductors in 2025 has led to a 2-3 percent increase in production costs, particularly for foreign brands like Volkswagen ID.4.

The Future of EVs

The future of EV sales will largely depend on how companies adjust their strategies in the face of dwindling federal assistance. With the projected decline in battery costs and the expansion of charging networks, EVs are expected to account for a quarter of U.S. sales by 2027, irrespective of tax credits. As America rapidly transitions towards sustainable mobility, it will be interesting to observe how the industry manages pricing and supply challenges while continuing to evolve.