For EVs, it’s Zero Hour. When the clock strikes midnight on Oct. 1, the $7,500 federal tax credit on EVs will expire, potentially turning affordable electric carriages into showroom pumpkins.
Sales of electric cars are certain to dip. Real-world prices will rise. The only question is how much, and for how long, as President Donald Trump and his administration continue to go scorched-earth over climate change and kneecap support for electric cars and renewable energy.
With one eye on the clock, consumers bought more new EVs in August 2025 than in any other month in US history: Sales reached 146,332 cars, up nearly 18 percent year over year, according to Cox Automotive. Nearly one in 10 new cars — 9.9 percent — was fully electric, another market milestone. Used EVs, good for credits of up to $4,000, set their own record with nearly 41,000 sales.
With one eye on the clock, consumers bought more new EVs in August 2025 than in any other month in US history
Those sales came despite a stubbornly high price premium of $9,066 versus a typical internal combustion model, according to Cox. But that calculation doesn’t take credits into account, meaning $7,500 credits helped many buyers get closer to elusive “price parity” with gasoline models — precisely what credits were designed to do, to spark mainstream adoption and combat climate change. In July and August, between credits and fire-sale incentives, the average EV cost $44,908, or $600 less than the $45,521 paid for ICE models, according to J.D. Power.
Now those clean-car credits that benefited buyers and automakers, first conceived in 1992 during the George H.W. Bush administration, are sailing off into the sunset. President Barack Obama switched an existing $7,500 credit to a point-of-sale rebate, with a goal of getting 1 million EVs on the road. Rebates continued as a cornerstone of President Joe Biden’s Inflation Reduction Act, but tied to a dizzying array of domestic-sourcing rules and restrictions that created confusion for buyers.
“Without doubt we will see a sales dip, but it won’t fall off a cliff,” says Ivan Drury, director of insights for Edmunds.com. “It’s not like people aren’t going to buy EVs.”
Tesla Model Y electric vehicles at a dealership in Colma, California, on July 1st. Tesla shares fell 4.7 percent in US premarket trading after President Trump lashed out at Elon Musk, accusing the Tesla and SpaceX chief executive officer of benefiting excessively from government subsidies for electric vehicles. Photo by David Paul Morris / Bloomberg via Getty Images
Short-term pain
EV sales could drop as much as 27 percent after consumers lose tax breaks, according to a study from economics professors Joseph Shapiro, Felix Tintelnot, and Hunt Allcott. Coincidentally, that 27 percent sales decline is exactly what Germany experienced over the first 10 months of 2024, after the government abruptly killed incentives worth $4,900.
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