EV sales stabilize at 5-6% one year after Congress ended the federal tax credit

Toyota dealership averaged 12-day hybrid supply as buyers lined up for Siennas

One year ago today, the auto industry bid farewell to a federal tax credit that helped bring down the cost of electric vehicles. Congress had voted to kill it as part of 2025’s One Big Beautiful Bill Act, and car buyers rushed to take advantage of the credit before it ended on September 30, 2025. Ask around now, and analysts give two answers: EV sales are down, and the falloff is not as steep as some had predicted.

The EV tax credit was created by Congress in 2008 and expanded under the 2022 Inflation Reduction Act, which restructured how the credit could be used, adjusted the rules for which cars qualified, and added a credit for used cars designed to extend benefits to low- and middle-income buyers. In its most recent form, buyers of new EVs could claim a federal tax credit worth up to $7,500, which could be layered on top of state incentives; buyers of used EVs could claim up to $4,000 on qualifying vehicles. New-vehicle buyers had to purchase EVs assembled in North America with a minimum share of domestic parts, and faced an income cap.

For lessees, the restrictions were looser. They could use the credit toward any EV — without limits on price, where the vehicle was made, or their income. “The program was so good, it almost made no sense to buy the car,” said Sal Iqbal, general sales manager of a Toyota franchise in Massapequa, New York, where he has worked for nearly 10 years.

When the Inflation Reduction Act took effect in August 2022, EVs made up about 5% of new-car sales. Over the following three years, the share grew, ticking past 6%, then 7%, then 8%. It swelled to 11.4% in September 2025, as buyers rushed to claim the credit’s final days, according to Edmunds.

Congressional Republicans, who had long argued that markets, not the government, should determine what Americans drive and labeled the credit wasteful spending, voted to end the program as part of the One Big Beautiful Bill Act. It expired on September 30, 2025. A month later, with the credit gone, the EV share of new-car sales had fallen to 5.8%, according to Edmunds.

Cox Automotive recorded a similar arc. EV sales peaked around September 2025, then dropped over the two quarters that followed. Compared with the year before, late-2025 EV sales fell 36% year-over-year, and the first quarter of 2026 was down 27% year-over-year.

The market has not collapsed entirely. Throughout 2026, EVs have accounted for somewhere between 5% and 6% of all new-car sales, according to Edmunds, with Cox Automotive reporting comparable figures. “This trajectory is ‘clearly nothing like what it was previously, but it has not fallen off of a cliff, which is what some people’s predictions would’ve been,’” said Ivan Drury, director of insights at Edmunds.

The drop-off was steep enough at the local level that Iqbal did not sell another EV at his dealership until mid-November 2025. “A lot of people are still scared of the electrical side of EVs because it gives them anxiety of losing charge on the middle of the road,” he said. Hybrids, by contrast, “the best of both worlds,” inspire no such worries.

When Iqbal heard the EV federal tax credit was going away, he was nervous. “We didn’t know what was going to happen,” Iqbal said. Even though about 10% of the vehicles sold at the dealership where he works are electric, he said, “We can’t just sit on inventory. It’s only going to depreciate more and more.”

Hybrids have taken up much of the slack. Part-electric, but still powered by gas, hybrids have greater fuel economy than traditional gas vehicles, and a lower price point than EVs. National hybrid sales rose almost 27% over the past year, according to Edmunds data.

At Toyota’s Massapequa franchise, what was once a slow-moving product has become hard to keep in stock. “We used to have Siennas sit on the lot before,” Iqbal said, referring to the Toyota minivan. “We used to have to literally beg people to take a Sienna, and now we can’t keep them on the shelf. People are lining up for Siennas.”

Drury confirmed the pattern: minivans like the Sienna were once considered undesirable, “and now it’s like, ‘Oh, if I could get my hands on a sweet Sienna, I’d do anything.’” The same dynamic, he said, is playing out with Toyota’s RAV4, a small hybrid SUV.

The dealership has averaged a 12-day supply of hybrids over the past year. “That means if I don’t get another vehicle from the factory, it will take me 12 days to sell out of my whole inventory,” Iqbal said. “We consider anything under 14 days basically sold out,” Drury said.

Hyundai’s hybrid sales rose 33% in August compared with the previous year, making up almost 30% of its August sales. Kia’s August hybrid sales rose 99% compared with the previous year.

Toyota did not return requests for an interview or for sales statistics. The company has converted several of its most popular models — including the RAV4 and the Camry — to hybrid-only lineups over the past two years. “Toyota had their ‘I told you so’ moment many times over now,” Drury said.

Analysts pointed to two factors behind the hybrid surge. Gasoline prices have hovered around $4.50 per gallon nationally, and Edmunds data shows hybrid sales jumped in March, shortly after the United States began its war with Iran — a geopolitical shift that analysts said was not in their 2026 forecasts.

“Hybrids were always there. They’re always kind of lurking in the background of attention,” Drury said. After the war with Iran began, he said, traffic on the Edmunds site for both hybrids and EVs climbed, but “many consumers either did not move forward with their EV plans or they just bought a hybrid instead,” most likely because of the lower price point. “The downfall of the EV has highlighted how good the hybrid is,” Drury said.

Drury called Toyota “the clearest victor in 2026,” citing its hybrid-heavy lineup and long history of making them. Valdez Streaty of Cox agreed. “Toyota is definitely, I think, capitalizing on this period where we have high gas prices,” she said. “So you can save money on gas. If you care about the environment, you get some of those environmental benefits. And also, you don’t have to worry about charging, so it takes away that friction point.”

Valdez Streaty said hybrids are “having their moment, are continuing to have their moment.”

At the Massapequa dealership, the buyers themselves have changed, Iqbal said. “They know more about the cars than we do sometimes,” he said. “They are literally in-depth with every little feature. They know the cubic feet of the trunk.”

But most of all, he said, they know they will not spend as much at the pump. “They know that same $50 in gas is taking them two weeks instead of one week, and that can make or break somebody, depending on who you are,” Iqbal said. “Nobody wants gas prices to be high. We all want them to be lower. But what can we do? Am I not going to drive?”

The Trump administration has also moved to weaken the broader policy environment for EVs beyond the tax-credit repeal. It scrapped California’s ability to set strict emissions standards and dropped penalties on automakers that did not meet federal fuel-efficiency targets. This week, the administration scaled back the fuel-efficiency standards themselves.

The average EV transaction price was over $54,000 in August, compared with just under $50,000 for gas-powered vehicles, according to Cox Automotive. Drivers have long worried about limited range, a lack of charging points, and the expense of replacing a lithium-ion battery that can cost thousands of dollars.

A second market is beginning to take shape: used EVs. Used EVs currently make up less than 3% of the used-car market, but that share is growing, according to Valdez Streaty. More than 300,000 vehicles are expected to come off lease over the next year.

“That’s probably the single best advertisement for electric vehicles in the last several years,” said Nick Nigro, founder of the climate-focused think tank Atlas Public Policy. “The vast majority of people buy used vehicles, and that’s what makes up most of the vehicles on the road.”

Outside the United States, the EV transition is moving more quickly. According to the International Energy Agency, more than half of new cars sold in China in 2025 were electric, and over 30% of cars sold in Europe last year were electric. The Chinese automaker BYD Auto now sells more electric vehicles than Tesla.

Valdez Streaty said the loss of the tax credit has not stopped US automakers from continuing to produce EVs — the companies still face global competition — but has shifted their production timelines. “It’s kind of just shifted their timeline and the way they roll things out,” she said.

She described the US EV market in 2026 as “finding a new equilibrium.” Demand for new EVs remains, she said, “at a lower and more stable level, while growth is stronger in used EVs and hybrids.”

“EV adoption may be slower,” Valdez Streaty said. “But I think the future’s still electric.”