By Nora Eckert
DETROIT (Reuters) -Automotive executives are bracing for a freefall in U.S. electric-vehicle sales following the disappearance of a critical $7,500 tax break for buyers.
"It's a game-changer," Ford CEO Jim Farley said during a Detroit event on Tuesday, just hours before the federal subsidy expired.
Farley said he would not be surprised if electric-car sales drop to 5% of total U.S. vehicle sales next month. That would be about half the level from August – a monthly record as consumers
hurried to take advantage of the credit – and among the lowest levels in several years.
“The EV market is going to collapse in October,” said Christian Meunier, chairman of Nissan Americas. Japan's Nissan is still rolling out a redesigned version of its Nissan Leaf small EV in the U.S., but Meunier expects tough competition as rival automakers strain to find buyers for their electric cars.
“That competition is going to be super-brutal, because there is a lot of stock. Our competitors have built a lot of EVs,” Meunier told Reuters in an interview Tuesday.
Congress approved a $7,500 tax credit in 2008 for buyers of electric cars and plug-in hybrid vehicles. The 2022 Inflation Reduction Act extended the credit, while also limiting eligibility to EVs built in the U.S. that use certain levels of domestically sourced batteries and materials.
U.S. President Donald Trump’s tax-cut and spending bill, signed into law in July, set the September 30 expiration. His administration has taken other steps that could slow momentum for EVs, such as pausing the fines that car companies pay for failing to hit fuel-efficiency regulations. Trump campaigned last year on ending former President Joe Biden's "EV mandate."
Electric-vehicle registrations could fall 27% without the tax credit, according to a joint study in November 2024 from professors at the University of California, Berkeley, Duke University and Stanford University.
A SURPLUS OF UNSOLD EVs
The U.S. already lags other major car markets in EV adoption. In China, the global leader in EVs and production of batteries and their raw materials, sales of electrics and plug-in hybrids have surpassed 40% in recent months. Europe’s penetration rate has hovered close to 20%.
Even with the U.S. tax credit in place, sales growth in electric cars had decelerated in the past two years, before the deadline rush this past summer. That slowdown occurred in spite of automakers launching a slew of new EV models. Electric-vehicle sales rose just 1.5% in the first half of this year from a year earlier, according to Cox Automotive.
Some dealers worry that the removal of the $7,500 tax credit will saddle them with unsold EVs.
Scott Kunes, chief operating officer of a U.S. Midwest dealer group, said his group would take fewer EVs from manufacturers in the near term as his team waits to see how consumer demand shakes out.
Brad Sowers, who owns dealerships in the St. Louis, Missouri, area that sell Chevrolet, Jeep and other brands, said he thinks more-affordable EVs will continue to sell. But he worries that pricier models such as General Motors’ Chevy Silverado electric pickup truck – which can top $90,000 – will struggle.
GM and Ford are seeking to ease the blow of losing the tax incentive through programs that would allow dealers to roll the tax break into lease terms for several more months, Reuters reported this week.
Hyundai is offering $7,500 off its 2025 model-year Ioniq 5 EVs, and up to $9,800 in price reductions on 2026 model years of the vehicle, said Randy Parker, CEO of Hyundai Motor North America.
“There was an EV market before IRA, and there’s going to be an EV market after IRA,” Parker said.
Volvo Car CEO Hakan Samuelsson told Reuters in a recent interview that the Swedish automaker will not shift its strategy based on government policies.
“Our ambition is to be an electric company. That is not based on any tax credits or incentives. It's based on an electric car is better for U.S. consumers.”
(Reporting by Nora Eckert in DetroitEditing by Mike Colias and Matthew Lewis)
