A Year On, the EV Tax Credit Is Dead — But Electric Cars Keep Winning Over Buyers

One year after the end of the EV tax credit, the future of electric cars is not what some predicted. The credit was killed by Congress last year as part of 2025’s One Big Beautiful Bill Act, and it expired on September 30, 2025. The question now is whether the electric car era has ended, or if it simply paused.

The tax credit for electric vehicles brought down their cost, and car buyers moved quickly to claim it before it was gone. When the Inflation Reduction Act came into force in August 2022, electric cars accounted for about 5% of new car sales. By September 2025, that share had risen to 11.4%, with buyers rushing to take advantage of the credit’s final days. Data from Cox Automotive points to a rise in electric car sales that peaked around September, followed by a decline in the two quarters after the credit expired.

The Credit’s Numbers

Congress created the EV tax credit in 2008, and it got a major lift from 2022’s Inflation Reduction Act. The act changed how the credit worked and revised the criteria for which vehicles could receive it. It also introduced a credit for buying used cars, aimed at bringing advantages to low- and middle-income purchasers.

The federal tax credit for buying or leasing a new electric car has reached its current peak at up to $7,500, and it can be combined with state benefits. A separate credit for used electric vehicles goes up to $4,000 on qualifying cars. Buyers must buy electric cars made in, and built from, a specific share of parts from North America, with a limit on buyers’ income. Leasing electric cars offers an even better arrangement, since it allows the credit toward any electric car without caps on price, where the vehicle was made, or income.

The Toyota franchise in Massapequa, New York has a general sales manager named Sal Iqbal, and he got a close look at how well the system works. “The program was so good, it almost made no sense to buy the car,” was his take on it.

The Decline After Expiration

Sales of electric cars declined markedly at the start. By late 2025, they had dropped 36% compared to the previous year. The decline continued into the first quarter of 2026, when sales were down 27%.

But the decline has stabilized. This year, new electric car sales have been more sluggish but steady, accounting for somewhere between 5 and 6% of all new car sales throughout 2026, according to Edmunds. Cox Automotive reports similar figures.

Ivan Drury, director of insights at Edmunds, laid out the path in simple terms. The stabilization did not plummet, as some people’s predictions had forecast.

The Hybrid Comeback

American car buyers are turning toward hybrids as the electric car slump has opened a window for them, and nationally, sales of these vehicles have risen almost 27% in the past year, according to Edmunds.

The cost of gasoline stays elevated, with national prices still near $4.50 per gallon. This has driven customers to seek vehicles that consume less fuel rather than those that use more.

Toyota dealers are seeing the shift firsthand. Iqbal noticed hybrid sales are way up. “We used to have Siennas sit on the lot before,” he said. “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 agreed. Minivans like the Sienna were considered undesirable years ago, “and now it’s like, ‘Oh, if I could get my hands on a sweet Sienna, I’d do anything.'” The same thing is happening with Toyota’s RAV4, a small hybrid SUV.

The industry insights director at Cox Automotive, Stephanie Valdez Streaty, described how the market is moving. “Hybrids are having their moment, are continuing to have their moment.”

The Political Fight Behind the Change

After long arguing that markets, not the government, should shape what Americans drive, Congressional Republicans eliminated the EV tax credit last year, calling it wasteful spending.

This week, the Trump administration went further than scrapping the deal with California to meet federal fuel-economy standards. It moved to scale them back entirely. The move follows the administration’s earlier decision to end the agreement with California’s ability to set strict emissions standards and nixed penalties on carmakers who didn’t, which was meant to ensure enough fuel-efficient vehicles were being made.

The news that the EV federal tax credit was ending made Iqbal anxious. He responded by saying “We didn’t know what was going to happen,”.

The Data Shape

The data makes the trend obvious: electric vehicle sales jumped before the deadline passed, then dropped steeply, and finally settled at a lower but steadier rate. Cox Automotive and Edmunds both show the same general shape in their numbers.

1. Electric car sales grew from 5% of new car sales in August 2022 to 11.4% in September 2025.
2. Sales fell 36% year-over-year in late 2025 and 27% in the first quarter of 2026.
3. Sales stabilized at between 5 and 6% of new car sales throughout 2026.
4. Hybrid sales are up almost 27% in the past year.

Cox Automotive reports that the typical electric car sale reached more than $54,000 in August, while a conventional gas vehicle sold for less than $50,000.

The Price Gap

The difference in pricing matters for buyers. Electric cars cost more to buy, even with the credit. The average electric car transaction price was over $54,000 in August, compared to just under $50,000 for gas-powered vehicles, according to Cox Automotive.

It is that very gap that drivers fear. The restricted distance, the absence of places to charge, and the cost of swapping out a large lithium-ion battery, which can run into thousands of dollars, have for a long time weighed on them.

The Market’s Response

The stabilization has not dropped sharply, contrary to some people’s predictions. The credit period came to an end, and the market found its footing in a new routine.

There is a real and ongoing rise in hybrids. They are enjoying their time right now, and that moment shows no sign of ending soon.

A closer look at the numbers reveals that electric vehicle sales have declined slightly while remaining steady, whereas hybrid sales are rising sharply. The tax credit has expired, hybrids are taking over, and the electric car market has found a new equilibrium.

Source material: “One year after the end of the EV tax credit, is the future still electric?,” NPR.

car sales · electric cars · EV tax credit · federal policy · hybrid cars