U.S. sales of electric vehicles faltered in 2025 amid the expiration of key federal tax incentives, even as hybrid vehicle purchases continued to rise, according to new estimates from the U.S. Energy Information Administration (EIA). The data underscore how government policy, consumer preferences and broader economic forces are reshaping the country’s light-duty vehicle market.
EIA’s analysis shows that about 22 per cent of light-duty vehicles sold in the United States in 2025 were electrified in some form — including hybrids, battery electric vehicles (BEVs) and plug-in hybrids (PHEVs) — up from 20 per cent in 2024. However, the growth trajectory was uneven: hybrid electric vehicles continued gaining market share, while battery electric and plug-in hybrid sales declined over the year.
The divergence reflects seismic changes in tax policy. Two major incentives — the New Clean Vehicle Credit and the Qualified Commercial Clean Vehicle Credit, each worth up to US $7,500 — expired on September 30, 2025 as part of broader tax changes enacted by Congress. The credits had long been a cornerstone of U.S. EV policy, lowering purchase costs for consumers and supporting demand.
Industry analysts widely anticipated a drop in EV sales once those incentives ended. A market expert quoted by Reuters in September said the impending tax credit expiration would likely cause a “short-term dip” in EV sales as buyers rushed to close deals before the deadline.
Indeed, EIA’s figures show that BEVs reached a record share of 12 per cent of U.S. light-duty vehicle sales in September 2025, just before the tax credits disappeared. Afterwards, BEV sales fell to less than 6 per cent in each of the remaining months of the year, marking the first annual decline in battery electric vehicle sales and share in the United States.
Policy shifts and market reactions
Industry reporting confirms a sharp hit to EV demand post-credit expiry. A Yahoo Finance analysis found that EV sales at U.S. dealerships plunged by as much as 74 per cent from peak weekly levels after the federal tax incentive ended, highlighting the role subsidies played in consumer buying decisions.
Automakers have felt the impact. According to The Wall Street Journal, Ford Motor Co. saw electric vehicle sales decline sharply in November 2025, with BEV units down 61 per cent year-over-year as demand softened following the credit’s expiration. At the same time, hybrid sales — which were not eligible for the tax credit — increased, reflecting shifting buyer behaviour.
General Motors has also reported financial strain, with roughly US $6 billion in charges tied to declining EV sales and the loss of policy incentives, according to Associated Press reporting. GM’s ambitious electrification plans have been disrupted by a combination of subsidy cuts and looser emissions standards.
Why hybrids are gaining ground
Unlike battery electric vehicles, hybrid electric vehicles do not plug into the grid and rely on internal combustion engines coupled with electric motors. They were never eligible for the 2025 federal tax credits, yet hybrids continued to gain share throughout the year, buoyed by fuel-efficiency advantages and growing consumer comfort with electrified drivetrains.
Analysts point to price and convenience as key drivers. With federal incentives gone and many EV sticker prices remaining high — the average new EV transaction price exceeded US $60,000 in 2025 — hybrids have become an attractive alternative for mainstream buyers not ready to pay a premium for all-electric range.
Broader industry context
The U.S. trend contrasts with global EV markets, where overall plug-in sales continued to grow in 2025. Benchmark data indicates that global EV sales rose roughly 20 per cent, led by strong growth in European and Chinese markets, even as U.S. EV sales lagged due to fading incentives and weaker policy support.
China in particular remains dominant: EVs accounted for a majority share of the country’s automotive market in 2025, matched with aggressive local incentives and production scale. Those conditions continue to drive China’s outsized footprint in global EV manufacturing and sales.
Future outlook
Looking ahead, industry watchers say the U.S. EV market may stabilize or rebound if states, automakers, or future federal policy introduce new incentives or regulatory support. However, the 2025 experience highlights how sensitive EV adoption remains to public policy and cost incentives — a lesson likely to shape debates on electrification strategy and climate goals in 2026 and beyond.
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