On Wednesday, the federal EV tax credits in the United States officially concluded.
Introduced and extended by the 2022 Inflation Reduction Act, these credits provided up to $7,500 to consumers purchasing a new electric vehicle. They have played a significant role in decreasing initial costs for EVs, encouraging more individuals to buy them and assuring manufacturers of strong demand.
The end of the tax credits comes at a moment when battery-electric vehicles still represent a minor fraction of new vehicle sales in the nation. Moreover, transportation is a significant factor in US climate pollution, with cars, trucks, ships, trains, and planes collectively responsible for about 30% of total greenhouse gas emissions.
To predict what lies ahead for the US EV market, we can examine nations like Germany, which have terminated similar subsidy initiatives. (Spoiler: The end of the year may be tough.)
Factoring in fuel savings, the total costs associated with an EV can already be lower than those of a gasoline-powered vehicle today. However, EVs often entail a higher initial price, which is why various governments provide tax credits or rebates to facilitate technology adoption.
In 2016, Germany launched a nationwide incentive program to promote EV sales. During its operation, drivers could receive grants upwards of around €6,000 toward acquiring a new battery-electric or plug-in hybrid vehicle.
Eventually, the government began to withdraw these credits. Support for plug-in hybrids ceased in 2022, and commercial purchasers lost eligibility in September 2023. The full program came to an abrupt stop in December 2023 when the government announced the termination of these incentives with roughly one week’s notice.
Monthly sales data reflects the impact of these changes. In every instance of reduced public backing, there is a surge in sales just prior to the cutback, followed by a downturn afterward. These immediate effects can be striking: January 2024 witnessed the sale of approximately half as many battery-electric vehicles in Germany compared to December 2023.
We are already observing the initial phase of this boom-bust cycle in the United States: EV sales increased in August, accounting for about 10% of all new vehicle sales, and analysts anticipate September will be unprecedented for sales. Many rushed to leverage the credits while they were available.
Next comes the downturn—the forthcoming months will likely be quite sluggish for EVs. One analyst predicted to the Washington Post that numbers could drop to single digits, “around 1 or 2%.”
Ultimately, it’s not entirely unexpected to see localized effects surrounding these policy changes. “The real question is how long this decline will persist, and how gradually any growth revival will occur,” Robbie Andrew, a senior researcher at the CICERO Center for International Climate Research in Norway who gathers EV sales data, noted in an email.
During discussions with experts (including Andrew) for an article last year, several expressed concern that Germany’s subsidies were being withdrawn prematurely, fearing for the technology’s long-term viability in the nation. Furthermore, Germany was significantly ahead of the US, with EVs constituting 20% of new vehicle sales—double the share in America.
After the cessation of subsidies, Germany did experience a longer-term decline in EV growth. Battery-electric vehicles accounted for 13.5% of new registrations in 2024, a drop from 18.5% the previous year, and the UK subsequently surpassed Germany to become Europe’s foremost EV market.
Progress has been made this year, with sales in the first half exceeding the records set in 2023. However, significant growth is required for Germany to achieve its target of registering 15 million battery-electric vehicles by 2030. As of January 2025, only 1.65 million were registered.
According to initial forecasts, the termination of tax credits in the US could greatly hinder advancements in EVs and, consequently, in reducing emissions. Sales of battery-electric vehicles could potentially be about 40% lower in 2030 without the credits compared to scenarios with them, according to one study conducted by Princeton University’s Zero Lab.
Some states in the US still maintain their own incentive programs for consumers interested in electric vehicles. However, lacking federal backing, the US is likely to lag behind global EV frontrunners like China.
As Andrew stated: “From a climate standpoint, with road transportation responsible for nearly a quarter of US emissions, leaving the low-hanging fruit untouched is a notable setback.”
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