One year after the end of the EV tax credit, is the future still electric?
In an aerial view, an electric vehicle charges at an EVgo electric charger on March 30, 2026, in Monrovia, California.
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One year ago today, the auto industry bid farewell to a hefty federal tax credit that helped bring down the cost of electric vehicles. Congress had voted to kill it as part of 2025’s One Big Beautiful Bill Act — and car buyers rushed to take advantage of the credit before it ended on September 30, 2025.
So, how have EV sales fared since?
Ask around, and you get two answers. One is that EV sales are down, according to data from car analytics companies like Cox Automotive and Edmunds. No one is the least bit surprised.
When the Inflation Reduction Act took effect in August 2022, expanding the credit to more buyers, EVs made up about 5% of new car sales. Over the following three years, EV sales grew, ticking past 6, then 7, then 8%. They swelled to 11.4% in September 2025, as people rushed to take advantage of the tax credit’s final days, according to data from Edmunds.
Data from Cox Automotive shows a similar bounce. EV sales peaked around September — then dropped in the following two quarters once the credit expired. Compared to the year before, in late 2025, they fell 36%. They were down 27% year-over-year in the first quarter of 2026.
This year, new EV sales have been more sluggish — but they’re stable. EVs have steadily accounted for somewhere between 5 and 6% of all new car sales throughout 2026, according to Edmunds. Cox Automotive reports similar figures. This trajectory is “ clearly nothing like what it was previously, but it has not fallen off of a cliff, which is what some people’s predictions would’ve been,” said Ivan Drury, director of insights at Edmunds.
But ask Sal Iqbal how EV sales have fared over the last year, and you’ll get another answer — and this one is more surprising. He’s the general sales manager of the Toyota franchise in Massapequa, New York, where he’s worked for nearly 10 years. And this year he noticed: Hybrid sales are way up.
Sal Iqbal, the general sales manager at the Toyota franchise in Massapequa, New York, on the sales floor.
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“We used to have Siennas sit on the lot before,” Iqbal said, referring to the Toyota model which, like other hybrids, uses a gas engine and battery-powered electric motor. “ 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.”
Drury concurs: Siennas are a whole thing. Years ago, he said, minivans like these were considered undesirable, “and now it’s like, ‘Oh, if I could get my hands on a sweet Sienna, I’d do anything.'” The same thing, he said, is happening with Toyota’s RAV4, a small hybrid SUV.
And nationally, American car buyers are really gravitating towards hybrids. Sales are up almost 27% in the past year, according to data from Edmunds.
Is it because the federal EV tax credit went away? Maybe. Is it because gasoline prices are still hovering around $4.50 per gallon nationally? Also maybe. Data from Edmunds shows hybrid sales jumped up in March, shortly after the U.S. began its war in Iran — a geopolitical shift that was not on analysts’ radars when they made their forecasts for 2026.
The rise of the hybrid has been a kind of bright spot in a year that’s been flat for the EV industry.
“ Hybrids are having their moment, are continuing to have their moment,” said Stephanie Valdez Streaty, director of industry insights at Cox Automotive and who studies the transition to EVs.
Drury put it this way: “ The downfall of the EV has highlighted how good the hybrid is.”
How the federal tax credit worked
The EV tax credit was created by Congress in 2008, but it received a big boost from 2022’s Inflation Reduction Act, which restructured how the credit could be used and adjusted some of the rules for which cars could qualify. It also added a credit for purchasing used cars, an expansion designed to extend benefits to low-and-middle-income buyers.
In the credits’ most recent form, people who bought or leased a new electric vehicle could earn a federal tax credit worth up to $7,500, which could be stacked on top of state incentives. The credit for used vehicles was up to $4,000 on qualifying vehicles.
For people buying new cars to qualify, they needed to purchase EVs that were made in, and contained a certain percentage of parts from, North America. There was also an income cap for buyers.
That was a good deal, but it was an even better deal for people leasing EVs. They could use that credit toward any EV car — without limits on price, where the vehicle was made, or their income.
“The program was so good, it almost made no sense to buy the car,” Iqbal said.
Either way, the credit helped juice interest in EVs, and overcome some of the reservations drivers have about them. EVs generally have a higher sticker price than gas-powered cars; the average EV transaction price was over $54,000 in August, compared to an average of just under $50,000 for gas-powered vehicles, according to Cox Automotive. Drivers have long worried about limited range, or a lack of charging points, or the expense of replacing an enormous lithium-ion battery that can cost thousands of dollars.
Congressional Republicans got rid of the EV tax credit last year after long arguing that markets, not the government, should influence what Americans drive, and dubbed the tax credit wasteful spending.
Meanwhile, the Trump administration chipped away at other policies that promoted electric vehicles. It scrapped California’s ability to set strict emissions standards. It nixed penalties on carmakers who don’t meet federal standards for making enough fuel-efficient vehicles. This week, it scaled back those standards altogether.
When Iqbal heard the EV federal tax credit was going away, he was nervous.
“We didn’t know what was going to happen,” Iqbal said. Even though about 10% of the vehicles sold at the dealership where he works are electric, he said, “We can’t just sit on inventory. It’s only going to depreciate more and more.”
Sure enough, after Sept. 30, 2025, Iqbal says they didn’t sell another EV until mid-November.
That trend bore out nationally. People rushed to buy electric vehicles months leading up to the tax credit going away, but EV sales slumped in the next few months; over 11% of car buyers bought electric vehicles in September 2025, but only 5.8% did a month later, Edmunds data shows.
Over the last year, Iqbal says, EVs overall have been a tougher sell without the help of that credit. After all, Iqbal said, some people are still nervous about EV batteries, or about charging.
“A lot of people are still scared of the electrical side of EVs because it gives them anxiety of losing charge on the middle of the road,” he said.
Hybrids, though, inspire no such worries. The hybrid is, he said, “the best of both worlds.”
Hybrids are having a moment
Part-electric, but still powered by gas, hybrids have greater fuel economy than traditional gas vehicles, and a lower price point than EVs.
“Hybrids were always there. They’re always kind of lurking in the background of attention,” said Drury.
But after the war with Iran began, they got a lot more attention. Drury said traffic on the Edmunds site for both hybrids and EVs climbed. But ultimately, he said, “many consumers either did not move forward with their EV plans or they just bought a hybrid instead,” most likely because of the lower price point.
To him, the clearest victor in 2026 has been Toyota, a company with a hybrid-heavy lineup and a long history of making them. In the past couple of years, Toyota’s transitioned some of its most popular cars, like the RAV4 and the Camry, to be hybrid-only.
“Toyota had their ‘I told you so’ moment many times over now,” Drury said.
Valdez Streaty of Cox agrees. “ Toyota is definitely, I think, capitalizing on this period where we have high gas prices,” she said. “So you can save money on gas. If you care about the environment, you get some of those environmental benefits. And also, you don’t have to worry about charging, so it takes away that friction point.”
Toyota didn’t return requests for an interview or for sales statistics. But Drury says you can learn a lot about demand for vehicles by seeing how long they spend on the lot.
And in Massapequa, Iqbal said, hybrids are flying off the lot. On average, over the past year, Iqbal said they’ve had a 12-day supply. “That means if I don’t get another vehicle from the factory, it will take me 12 days to sell out of my whole inventory,” he said.
Those kinds of numbers are basically unheard of, said Drury, and indicate the high demand for Toyota vehicles: “We consider anything under 14 days basically sold out.”
The momentum for hybrids goes beyond Toyota. Hyundai sold 33% more hybrid vehicles in August compared to the year before — making up almost 30% of its total August sales. Kia’s August hybrid sales rose 99% compared to the previous year.
The Toyota franchise in Massapequa, New York, has seen a banner year of hybrid sales.
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Willa Rubin/NPR
Iqbal said when potential hybrid buyers come in to the Toyota dealership in Massapequa, they have done their homework.
“They know more about the cars than we do sometimes,” he said. “ They are literally in-depth with every little feature. They know the cubic feet of the trunk.”
But most of all, he said, they know that they won’t be spending as much on gas. “They know that same $50 in gas is taking them two weeks instead of one week, and that can make or break somebody, depending on who you are,” Iqbal said.
After all, he said, “ Nobody wants gas prices to be high. We all want them to be lower. But what can we do? Am I not going to drive?”
The market for used EVs is growing
There is a second possible bright spot that’s beginning to glow for EV buyers and sellers — and that’s a burgeoning used car market.
It’s a legacy from the era of the tax credit: because so many people used it to lease EVs, as more and more of these vehicles come off lease, they are showing up on used car lots as inventory.
Even though used EVs make up less than 3% of the used car market, that number is growing, said Valdez Streaty of Cox Automotive. In the next year, more than 300,000 vehicles will come off lease, she said — and she expects those numbers to keep rising.
This means EVs could be more accessible to buyers at lower price points, since used cars are generally cheaper than new ones. And, Nick Nigro, founder of the climate-focused think tank Atlas Public Policy said, seeing more EVs around will help normalize them.
“ That’s probably the single best advertisement for electric vehicles in the last several years,” Nigro said. “ The vast majority of people buy used vehicles, and that’s what makes up most of the vehicles on the road.”
Valdez Streaty says that even without the tax credit, American automakers are under some pressure to keep making EVs. After all, they must compete globally. Outside the U.S., the market for electric vehicles is picking up speed. In China, more than half of new cars sold in 2025 were electric, and over 30% of cars sold last year in Europe were electric, according to the International Energy Agency.
Meanwhile, demand for Chinese-made electric vehicles continues to grow; the Chinese EV company BYD Auto sells more electric cars than Tesla.
The loss of the tax credit won’t stop automakers from producing EVs, she said: “It’s kind of just shifted their timeline and the way they roll things out.”
Valdez Streaty sees the EV market in 2026 as finding a new equilibrium.
“There’s still underlying demand for new EVs, but at a lower and more stable level, while growth is stronger in used EVs and hybrids,” she said.
EV adoption may be slower, Valdez Streaty said. But, she continued, “I think the future’s still electric.”
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