EV Update: Will The Market Survive The Expiration Of The Federal Tax Credit?

Manhattan Contrarian ^ | 26 Jul, 2025 | Francis Menton

[MtnClimber]

How quickly things change.

It was barely more than a year ago that climate activists and federal bureaucrats thought they had maneuvered the internal combustion engine (ICE) automobile to the brink of extinction. ICE vehicles had become like dinosaurs, inferior to their new competitors the EVs, and therefore headed for the scrap heap of history. Customers were flocking to the trendy new EVs, which were seeing rapidly rising sales.

And the all-powerful federal bureaucracy was going to give the final push to put ICE vehicles out of their misery. On June 7, 2024 President Biden’s National Highway Traffic Safety Administration had issued a final rule (“Corporate Average Fuel Economy [CAFE] Standards for Passenger Cars and Light Trucks for Model Years 2027 and Beyond and Fuel Efficiency Standards for Heavy-Duty Pickup Trucks and Vans for Model Years 2030 and Beyond”) jacking up mandatory average vehicle mileage to 50+ [mpg] as of 2031, with further increases to follow from there. Since no ICE vehicles bigger than a baby carriage could achieve that mileage, the only path forward for vehicle manufacturers would be rapid conversion to making only EVs. NHTSA’s mileage rule had also quickly followed an equally draconian mandate from EPA, finalized on April 18, 2024 (“Multi-Pollutant Emissions Standards for Model Years 2027 and Later Light-Duty and Medium-Duty Vehicles”) setting strict and declining limits for CO2 emissions that no ICE vehicles would be able to meet by the early 2030s. And meanwhile, 2022’s Inflation Reduction Act had extended a $7500 tax credit to buyers of new EVs through December 31, 2032.

So all the pieces were in place. By some time in the early 2030s, it would be effectively illegal to sell new ICE cars, and they would be rapidly disappearing from the roads.

Well, not so fast. Suddenly, the rapid advance of the EV may have stalled out completely. The federal regulators have reversed their direction. And customer preferences seemingly favorable to EVs may turn out to evaporate as soon as federal tax benefits end, an event now just a couple of months away.

NHTSA’s CAFE standards just got eviscerated by the “One Big Beautiful Bill” Act. Although the standards themselves have not yet been rescinded, the OBBB re-set the enforcement mechanism to have a maximum penalty of zero. This is from a July 8, 2025 memo from the law firm Sidley & Austin:

In one of its many changes, the One Big Beautiful Bill Act, enacted on July 4, 2025, eliminated civil penalties for noncompliance with federal fuel economy standards. Specifically, Section 40006 of the Act amends the language of the Corporate Average Fuel Economy (CAFE) statute to reset the maximum civil penalty to $0.00. Although the statute and its implementing regulations otherwise remain in place, this amendment removes any civil penalties for producing passenger cars and light trucks that do not meet fuel economy requirements.

As to the EPA-mandated CO2 emissions limits for vehicles, EPA announced on March 12, 2025 that it was beginning a process of reconsidering the vehicle greenhouse gas emissions rule that had just been adopted less than a year before. Excerpt:

U.S. Environmental Protection Agency (EPA) Administrator Lee Zeldin announced the agency will reconsider the Model Year 2027 and Later Light-Duty and Medium-Duty Vehicles regulation and Greenhouse Gas Emissions Standards for Heavy-Duty Vehicles. In addition to imposing over $700 billion in regulatory and compliance costs, these rules provided the foundation for the Biden-Harris electric vehicle mandate that takes away Americans’ ability to choose a safe and affordable car for their family and increases the cost of living on all products that trucks deliver.

That one may be in the regulatory grinder for many months, but with little doubt as to what the final result will be, namely full rescission.

And the $7500 per new vehicle tax credit? After just having been extended to 2032 by the Inflation Reduction Act of 2022, the credit has now been modified by the OBBBA to end as of September 30, 2025. From Kiplinger, July 12:

With the passage of President Donald Trump’s 2025 tax reform, known as the One Big Beautiful Bill (OBBB) the federal EV tax credit will expire for vehicles purchased or leased after September 30, 2025. As a result, buyers have only a short window left to take advantage of these federal savings.

All of a sudden, EVs and ICE vehicles are set to compete on a completely level playing field, with no mandates or tax credits propping up the EV side of the competition. How will that turn out? It remains to be seen, but data from the first half of the year indicate that the previous rapid increase in EV sales may already be stalling out. In a reversal for a previously rapidly-growing market segment, sales of EVs in the second quarter of 2025 declined significantly from the same period the prior year. From Cox Automotive, July 14, 2025:

[S]ales of new electric vehicles (EVs) in the second quarter of 2025 were lower year over year by 6.3%, in line with the Cox Automotive forecast. A total of 310,839 new EVs were sold in the U.S, down from 331,853 in the same period a year earlier. Sales in Q2 were higher than in Q1 by 4.9%, and total EV sales through the first half of 2025 set a record at 607,089, representing a 1.5% year-over-year increase.

Cox continues to predict a spike in EV sales in the third quarter of 2025, in the run-up to the expiration of the tax credit on September 30. However, after that, it is entirely likely that there will be a significant decline. Without the government mandates and subsidies, it’s hard to see EVs expanding much beyond being a niche product used as a second (or third) vehicle by affluent buyers.

---

TOPICS: Science; Society
KEYWORDS: climatechange; greenenergy

[MtnClimber]

Sorry Elon.

[MtnClimber]

Manhattan Contrarian ping

[fruser1]

My prediction is their prices will drop.

[joshua c]

another result will be safer gas cars

they will be larger

and they wont be made out of plastic

[Skwor]

My prediction is they go back to making Golf Carts. The market never supported a working business model for EVs outside a very small niche (and expensive) group.

Truth is, without subsidies, the “family EV” is basically not profitable on a large scale.

[Tell It Right]

Thanks for posting. I didn't know that the OBBB removed the penalty for not adhering to the CAFE standards. That's yuge!

As far as the headline goes, the EV market was already practically nothing even with the EV tax credit in place. The fad is over and hardly anybody else was buying EV's.

[Mouton]

Hopefully they retool and bring back sixes and eights that don’t need turbo thrust.

[Lovely-Day-For-A-Guinness]

It will return to the 1930's when Detroit Electric, one of the last major manufacturers of EV's, finally went belly-up in 1939 after the market decided which was better for transporting people and goods, EV or IC.

And so it should today.

[dfwgator]

The only good EVs..

[Tell It Right]

Truth is, without subsidies, the “family EV” is basically not profitable on a large scale.

I respectfully disagree. It's families in particular that can get practical use from an EV. I wouldn't get an EV as an only car, because there are some long trips that don't have plenty of fast chargers. Or perhaps a long trip in the north during the winter. Those are times a gas car is practically a must. Thus, families (i.e. needing two cars, not a single person needing just one car) are the ones for which one car being an EV might be having the best of both worlds (one EV and one gas car). The single people (read: need just one car) are the ones I think an EV would be a bad car for.

Even for families, I wouldn't get an EV unless you drive it plenty of miles with home charged miles. "Home charged" means don't live in an apartment where you can't set up a charger. So again, families are the best options for EV's because families are the ones more likely to be homeowners. And "plenty of miles" IMHO comes out to about 12K miles per year (the threshold where gas savings of an EV top the extra costs that come with an EV, at least that was the case 3 years ago when I researched it). My wife and I drive our EV 18K miles per year -- the gas savings and oil change savings is very significant. We no longer say "her car" and "his truck". Whichever one of us drives that day takes the EV to save on gas (unless of course it involves pickup chores).

[Sacajaweau]

It wasn’t surviving with the subsidies...so let’s take a wild guess.

[Skwor]

The risk of an EV on home charge alone makes it a bad idea, the fire hazard is a real concern. AND Still way easier to buy a cheap ICE then an EV. EV imo is neither practical nor sensible, it is a niche luxury item at best.

[Socon-Econ]

My guess: there will still be an EV market, but it will be smaller. The end of subsidies will reduce demand, but EVs still have advantages and emotional appeal for certain groups.

[Blueflag]

My EV always home-charges outside.

But then again, it’s an F-150 Lightning ;-)

AND I got a **GREAT** deal on it money-wise.

SO hate all ya want, it’s a great vehicle. AND it has FAR more power than my 2012 F-150 I traded in for it. 310 legit miles range in the summer so far.

[Lovely-Day-For-A-Guinness]

...the fire hazard is a real concern

A few weeks ago we took our truck on a ferry to Long Island. On the return trip, we were the first car on and had nothing but the sea in front of our position at the stern. The car adjacent to us was a Tesla. The entire time I was thinking about whether the thing would light up, and if it did there was no way to push it overboard.

I'm sure some EV-boi, perhaps one who owns a mustang, will chirp about more ICE automobiles catch fire than EV's. That's true, but it's uncommon for ICE vehicles to combust spontaneously when the engine isn't running. Accidents and neglect are the major reasons ICE vehicles burn.

[Sacajaweau]

You mean like my big old Buick.

My 1984 Monte remains my favorite.

[hal ogen]

Hopefully not. Few want to purchase these high-end golf carts...unless US Taxpayers are forced to subsidize them.

[mewzilla]

Mr. Musk, how about electric train travel?

Make train travel great again.

[alternatives?]

“My prediction is they go back to making Golf Carts.”

I would say small commuter cars and hybrids. There would be a market and they can improve both over time expanding their market. Government mandates are never a good idea particularly to solve an imaginary crisis.