One year after Congress terminated the federal electric vehicle tax credit under the One Big Beautiful Bill Act, U.S. EV sales have stabilized at five to six percent of new car sales following a steep post-expiration drop. Meanwhile, traditional hybrids have surged, jumping nearly 27 percent nationally as buyers pivot toward alternative powertrains.
The auto industry marked a stark turning point one year after the end of the EV tax credit, which officially expired for vehicles acquired on or after October 1, 2025. The repeal, enacted through the One Big Beautiful Bill Act signed on July 4, 2025, wiped out both the Section 30D new clean vehicle credit and the Section 25E used vehicle credit ahead of their original 2032 schedule.
Car buyers had rushed to dealership lots in the final days of September 2025, pushing electric vehicles to a record 11.4 percent of new car sales, according to data from Edmunds. But once the subsidy vanished, the market shifted abruptly.
How EV Sales Dropped and Stabilized After the Subsidy Expiration
The post-expiration hangover hit sales immediately. Cox Automotive data shows that EV sales peaked around September 2025 before plunging 36 percent in late 2025 compared to the previous year. Volumes fell another 27 percent year-over-year in the first quarter of 2026.
Even so, the market did not collapse entirely. Throughout 2026, new EV sales found a floor, steadily capturing between 5 percent and 6 percent of all new car sales, according to Edmunds and Cox Automotive.
When the Inflation Reduction Act expanded the credit in August 2022, EVs accounted for just about 5 percent of new car sales. Over the next three years, adoption crept upward past 6, 7, and 8 percent before the final subsidy rush. The subsequent dip brought market share back near its pre-expansion baseline, albeit with established manufacturing lines and higher sticker prices.
Toyota Franchise Surges as Hybrid Sales Jump 27 Percent Nationally
While dedicated electric vehicles flattened out, traditional hybrids captured the market vacuum. Across the United States, hybrid sales climbed nearly 27 percent over the past year, according to Edmunds data.
Sal Iqbal, general sales manager at a Toyota franchise in Massapequa, New York, watched the shift firsthand after nearly a decade on the sales floor.
“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.”
Sal Iqbal, general sales manager at the Toyota franchise in Massapequa, New York
Minivans and small hybrid SUVs like the Toyota RAV4 experienced a massive reversal in consumer sentiment.
National gasoline prices remaining around $4.50 per gallon further accelerated buyer interest.
“The downfall of the EV has highlighted how good the hybrid is.”
Ivan Drury, director of insights at Edmunds
Rules, Leases, and the Strict Compliance Standards That Shaped the Market
The terminated federal credit system left behind a complex compliance trail. Under Section 30D rules, new EV buyers previously qualified for up to $7,500 split evenly between critical mineral sourcing and battery component manufacturing standards. Used EVs carried a Section 25E credit worth 30 percent of the sale price up to $4,000, restricted to vehicles priced under $25,000 through licensed dealers.
Income caps also governed the incentives. Single filers faced a $150,000 adjusted gross income limit for new cars and $75,000 for used vehicles. Sourcing restrictions disqualified vehicles containing battery components or critical minerals tied to foreign entities of concern.
However, leasing offered a major loophole while the program ran.
With the IRS Energy Credits Online portal closed to new registrations as of September 30, 2025, buyers filing returns must include Form 8936 and its Schedule A to report prior point-of-sale transfers or claim remaining eligible deliveries.
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