How badly do U.S. buyers really want EVs? We’re about to find out

DETROIT — Automakers and investors are about to find out what the “natural demand” is for new all-electric vehicles in the U.S., starting this week.

Amid what’s set to be a record year for EV sales, including a new record for units sold in the third quarter, demand for EVs is expected to decline. That’s because federal incentives of up to $7,500 to purchase a plug-in vehicle are getting discontinued after Tuesday.

Many automakers have relied on the incentives to boost consumer demand for EVs, which they’ve spent billions of dollars developing even as the vehicles remain largely unprofitable.

Industry analysts and executives have said they believe EV sales can continue to grow in the future, but that there will soon be a boom-and-bust situation regarding demand for electric vehicles before there’s a new normal.

“We’re going to see some noise in October and November, and I expect that EV demand is going to drop off pretty precipitously,” General Motors CFO Paul Jacobson said during an investor event earlier this month. “We need to let it settle and understand where is that natural demand going and how do we meet that natural demand and ultimately try to lead customers to electric vehicles. That’s going to take a little bit of time.”

Jacobson’s remarks echo those of other industry leaders such as Hyundai Motor CEO José Muñoz and Tesla CEO Elon Musk.

“We are adjusting to the new situation and … we expect the mix of batteries to probably [not] grow as much as we already thought,” Muñoz told reporters earlier this month. “I think, in the short term, it’s going to go down, but in the mid-, long-term, we expect it to continue to grow.”

Musk, when discussing the company’s second-quarter results in July, said the EV maker could see “a few rough quarters” with the end of federal incentives and as Tesla’s automation plans are in their infancy.

But that might not happen immediately. Ahead of the federal EV program ending, many automakers encouraged consumers to purchase or lease new vehicles. That has included U.S. EV leader Tesla having a countdown on its website to the end of the federal incentives, which the company has historically used to promote lower vehicle prices on its site.

The federal incentives for consumers to purchase electrified vehicles have been in place since 2008, in varying forms. They were first introduced under Republican President George W. Bush, and were expanded under former President Barack Obama, a Democrat.

The incentives are coming to an end as part of the Trump administration’s “One Big Beautiful Bill Act,” which stripped the old enticement but included some perks for buying a U.S.-assembled vehicle, regardless of it being an EV.

“Policy really matters, and pulling away all these levers will slow the growth relative to what the path was before,” Elaine Buckberg, a senior fellow at Harvard University and former GM chief economist, said Wednesday during the Move America conference in Detroit.

Once the bill was passed, sales of EVs quickly gained traction, especially as some automakers added even more discounts to move out older models.

Cox Automotive forecasts sales of EVs hit 410,000 during the third quarter, up 21% from a year earlier. That would easily be the highest amount of EVs ever sold in a quarter in the U.S., as well as a record 10% market share.

“The federal tax credit was a key catalyst for EV adoption, and its expiration marks a pivotal moment. This shift will test whether the electric vehicle market is mature enough to thrive on its own fundamentals or still needs support to expand further,” said Stephanie Valdez Streaty, Cox Automotive director of industry insights.

Cox expects many buyers pulled ahead plans to purchase an EV before the federal incentives sunset. That was the case for buyer Paarth Sharma of New Jersey.

“I’ve been in the market for two to six weeks,” Sharma, who leased a Kia Niro EV, told CNBC. “It just accelerated because of the upcoming Sept. 30 order by Donald Trump and the EV rebates going away.”

The sales increase corresponded with a notable uptick in automaker incentives for EVs, as more buyers who qualified for offers rushed out to buy vehicles. Cox Automotive reports average incentive spend for EVs was more than $9,000 – more than double the industry average.

“The quarter delivered record EV sales and market share, but the pace will ease in Q4 and beyond as the impact of the IRA tax incentive begins to fade,” Valdez Streaty said.

While automakers have said they will continue to offer EVs, many companies are already taking steps to prepare for the expected impacts to sales, including laying off workers, cutting production of EVs or eliminating vehicles entirely.

Honda Motor on Wednesday, citing market conditions, confirmed plans to end U.S. production of its Acura ZDX electric crossover that was being produced by GM in Tennessee.

Separate from the Acura EV, GM has made several changes to its production plans for EVs that have included implementing downtime at plants, cutting upcoming production shifts and slowing its rollout of several models.

Others such as Volkswagen, Porsche and Rivian Automotive have announced changes to their EV plans or reductions in workforces related to EVs.

“EVs are not going away … but it’s not going to be a linear increase that we’ve seen over the last couple years, like we’re in for a short-term dip,” said Steve Horaney, senior vice president of the MEMA Original Equipment Suppliers, said Wednesday during the Move America event.

But some plans are already too far along to go back on. New models are coming soon, such as a redesigned Nissan Leaf – arguably the first mainstream EV that was offered in the U.S. back when it was launched in 2010.

Nissan officials at an event touting the new model said the end of the credits timing with the fall release of the new Leaf is “tough,” but even without the tax credit, the price of the vehicle — starting at around $30,000 — should attract buyers.

Those kinds of lower priced vehicles are expected to be even more important for EV customers and companies after the elimination of the tax credits, according to Valdez Streaty.

“The arrival of truly affordable models is so critical,” she said, citing upcoming EVs from the likes of GM and Ford Motor. “[They] could reshape the market.”