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| People
attend the launch
event for the Rivian
R2 at the Rivian South
Coast Theater in
Laguna Beach, Calif.,
on March 7, 2024.
Credit: Patrick T.
Fallon/AFP via Getty
Images |
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The
end of U.S. tax
credits for buying
electric vehicles has
changed the market in
ways that are still
unfolding.
I spoke this week with
people closely
monitoring the auto
industry to get a
sense of what’s next.
They said the loss of
federal incentives is
likely to dampen
shoppers’ enthusiasm,
but the upcoming
arrival of several
dozen new or
redesigned models
could help fuel a
comeback.
“I think the dust
needs to settle for
everyone to figure out
what’s going to happen
near term,” said
Stephanie Valdez
Streaty, director of
industry insights for
Cox Automotive.
Until Oct. 1, the
federal government
offered a tax credit
of up to $7,500 for
the purchase of a
qualifying new EV, and
$3,000 for a
qualifying used EV. In
addition, there was a
$7,500 incentive
available for new EV
leases. Those are now
gone with the passage
in July of the One Big Beautiful Bill Act, which sought to
undo clean energy
policies as part of a
larger package of tax
cuts and spending.
EV sales surged in
recent months as
customers aimed to get
the credits before
they expired. Now,
without the credits,
sales are likely to
drop this month and
the rest of this year.
But automakers have
taken steps to soften
the blow. Ford and
General Motors have
said they will continue to offer a $7,500 credit on leases.
They can do this
because their in-house
finance companies
purchased the vehicles
while the credits were
still active and the
companies can pass on
the savings to
consumers, even after
Oct. 1.
Hyundai is offering a
promotion in which it
is selling and leasing
its 2026 Ioniq 5 with
price cuts of up to $9,800, effectively
providing the
equivalent of the tax
credit and then some.
Also, some state and
local governments are
increasing their
incentives for buying
EVs. For example,
Colorado Gov. Jared
Polis last week announced that the state is
increasing its tax
credit from $6,000 to
$9,000 for buying or
leasing a new EV.
The promotions by
automakers are likely
to contribute to a
“soft landing” for EV
sales, said Ed Kim,
president and chief
analyst at
AutoPacific, a
research firm.
“We’ve hit a massive
speed bump,” he said.
“But I do firmly
believe that
electrification is the
future, and you can’t
stop the future,
especially when the
rest of the world is
heading that way.”
He is referring to how
China and the European
Union have outpaced
the United States in
terms of electrifying
their transportation
sectors.
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According
to AutoPacific’s most
recent forecast, EV
market share in the
United States is
expected to remain at
8 percent in 2025 and
2026, the same as it
was in 2024. This
represents a decrease
from the firm’s
estimate last year,
when it predicted
market share would
reach 11 percent in
2025 and 15 percent in
2026.
While the current
situation is not ideal
for anyone who wants
to see broad EV
adoption, the forecast
indicates that the
market will hold its
own despite the end of
the tax credits, Kim
said.
Keith Barry, who
covers autos for
Consumer Reports, had
a similar sentiment
about how life will go
on for the U.S. EV
market.
“We don’t know what
happens next, but I
suspect that Oct. 1
won’t be the ‘end of
the world’ for EV
deals,” he said in an
email. “Some
automakers found a way
to extend tax credits
on leases for some
in-stock EVs until the
end of the year. Other
automakers ramped up
production in
expectation of the tax
credit being around
until 2032, and now
they have too much
stock and have to
price their vehicles
accordingly.”
Barry’s main advice
for EV buyers is
similar to what it was
when tax credits were
still around. First,
he thinks people
should consider
leasing an EV rather
than buying one.
“The technology is
changing so fast that
you don’t want to get
stuck with a model
that’s out of date and
that has depreciated
accordingly,” he said.
“With a lease, that’s
not your problem.”
Second, Barry
recommends that
shoppers choose a
model that has been on
the market for a few
years. In his
experience, newly
designed cars have
growing pains and tend
to become more
reliable after the
first model year.
To gain insight into
how EV companies view
this moment, I got in
touch with the Zero
Emission
Transportation
Association, an
advocacy group for
auto manufacturers,
battery makers and
others that support
the growth of the EV
economy. Corey Cantor,
the group’s research
director, said this is
a good time to focus
on consumer education
about the benefits of
EVs, such as lower
fuel and maintenance
costs.
He described this as
“getting back to
basics of making
electric vehicles and
the industry more
understood by the mass
market.” Such an
approach makes sense,
he said, because the
cars continue to
improve and some of
the main
obstacles—such as
concerns about battery
range and access to
charging stations—are
diminishing as
batteries improve and
the charging
infrastructure
expands.
About three dozen new
or redesigned EVs are
coming on the market
later this year and
next year. This
reflects automakers’
continuing ramp-up of
their EV lineups, and
that the companies
were putting together
their plans for 2025
and 2026 before they
had much of an inkling
that the tax credits
would be canceled.
For perspective, the
new models will mean
that shoppers will
have about 50 percent
more EV options than
they currently have.
(I’m basing this
percentage on Cox
Automotive’s list of current EV models.)
I asked each of the
people I interviewed
this week which models
they thought have the
potential to be great
cars, strong sellers
or both.
Valdez Streaty is
eager to see the
Rivian R2, a mid-size
SUV set to begin
production next year,
with a starting price
of about $45,000,
which is much lower
than other vehicles in
the company’s lineup.
She has high
expectations for the
new version of the
Chevrolet Bolt
hatchback, which is
set to begin
production late this
year after a
three-year break. The
updated version uses
General Motors’ Ultium
battery platform and
is likely to have a
starting price in the
$35,000 range.
The new Bolt “could be
really good for the
industry, since it’s a
good price point,” she
said.
She’s hinting at the
larger question of
which upcoming model
will appeal to a mass
market because of a
combination of an
affordable price and
compelling features.
“The new Nissan Leaf
is one to watch,” said
Barry of Consumer
Reports.
The next-generation
Leaf will go on sale
this year with a
starting price of
$29,990. Previous
versions were
affordable but often
lacking in range and
features. This one has
a listed range of 303
miles, which is a lot
for an entry-level
model.
Kim is eager to see
how customers respond
to the Subaru
Trailseeker, which is
set to go on sale next
year with a price
likely to be in the
$50,000 range.
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| Guests
look at the 2026
Subaru Trailseeker
after it was unveiled
during a press preview
at the New York
International Auto
Show in New York City
on April 16. Credit:
Timothy A. Clary/AFP
via Getty Images
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“It’s
basically an electric
Outback,” he said,
referring to one of
Subaru’s top-selling
and best-known models.
He noted that Subaru
has often appealed to
consumers who are also
likely to be open to
buying an EV. So, if
the brand ever
produces a compelling
EV, it should have an
eager audience.
I haven’t yet
mentioned Tesla, the
country’s leading EV
brand, which has
suffered through
declining sales and
harmed its image
because of CEO Elon
Musk’s close
association with the
Trump administration.
On Tuesday, Tesla
announced the
introduction of the Model 3 Standard and Model Y Standard, which
are more affordable
versions of the
company’s top two
models.
The Model 3 Standard
has a base price of
$36,990, which is
$5,500 less than the
Model 3 Premium. The
Model Y Standard sells
for $39,990, which is
$5,000 less than the
Model Y Premium.
To reduce the prices,
Tesla took steps to
cut costs. One notable
difference is that the
Model Y Standard’s
glass roof is only on
the outside of the
car, while the inside
is a solid headliner
of sound-absorbing
material, creating an
effect which Car and Driver describes as “pulling a ‘Cask
of Amontillado’ and
sealing occupants off
from the panoramic
glass above.”
Is the lower price
going to boost Tesla’s
sales and offset the
effects of losing tax
credits?
It may help a little,
but Kim is mostly
unimpressed.
“I see it as a
post-credit price
correction more than
anything else,” he
said.
Even with a lower
price, he thinks the
Model Y compares
unfavorably in terms
of cost and features
with the Ioniq 5.
And, as several people
have observed this
week, Tesla’s price
cuts aren’t enough to
offset the effect of
losing the tax credit,
underscoring how the
loss of the credit is
like a sad trombone
playing in the
background.
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Other
stories about the
energy transition to
take note of this
week:
Global
Renewable Power
Capacity Poised to
More than Double by
2030: The
International Energy
Agency’s new outlook
shows that the world’s
renewable energy
capacity is on track
to double by 2030,
with most of the new
additions coming from
solar power, as my colleague Kiley Bense reports for ICN. But
this forecast
represents a step back
in some ways from what
the IEA was previously
expecting, and that’s
mainly due to the
Trump administration’s
backsliding on clean
energy policy, which
is leading to a big
downward revision in
projected renewable
energy growth for the
United States.
California’s
Governor Vetoes
Three Bills
Supported by Clean
Energy Advocates: California
Gov. Gavin Newsom has
vetoed three bills
that would have
boosted virtual power
plants and taken other
steps to help
customer-owned energy
technologies serve the
grid, as Jeff St. John reports for Canary Media.
Newsome said the bill
would complicate
existing plans to use
the technologies to
meet state energy
goals. The vetoes and
their justification
are frustrating for
clean energy
advocates, who say it
is an opportunity for
California to help
lead the way in
finding ways to reduce
electricity demand at
a time when demand and
prices are rising.
Lawsuit Aims
to Force EPA to Fund
Solar for All
Program: Eight
plaintiffs filed suit
this week against the
Environmental
Protection Agency to
try to undo a decision
to cancel $7 billion
in funding for the
Solar for All program,
as Diana DiGangi reports for Utility Dive.
Solar for All sought
to expand access to
rooftop solar and
community solar for
low- and
moderate-income
households, and its
abrupt cancellation
was a severe blow. “If
Defendants’ unlawful
termination of the
Solar for All program
is allowed to stand,
nearly one million
low-income households
will lose access to
affordable, resilient
solar in communities
in all states and
territories, and
hundreds of thousands
of good-paying,
high-quality jobs will
be lost,” the
plaintiffs said.
A
State-by-State Look
at the Costs to
Drive an EV Versus a
Gas Car: One
of the big benefits of
driving an electric
vehicle is that
charging the battery
is usually much less
expensive than buying
gasoline, but the
price difference
varies a lot depending
on where you live. Francesca Paris of The New York Times reports
on which states are
cheapest for charging
an EV at home relative
to buying gasoline for
a similar vehicle. The
biggest savings are in
the Pacific Northwest,
with Washington and
Oregon ranking at the
top, which indicates
that electricity is
relatively affordable
there compared to the
price of gasoline. The
smallest savings are
in New England, with
Connecticut and
Massachusetts at the
bottom.
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