The year 2025 could go down as the best of times and the worst of times for the electric vehicle sector.
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Companies such as Tesla Inc (NASDAQ:TSLA) reported record third-quarter deliveries due to increased demand as the federal EV tax credit expired.
A collapse in demand after the third quarter will likely see the year end on a low note and be the first year since 2019 to not see year-over-year increases in the U.S.
EV Sales To Fall In 2025
Electric vehicle companies and traditional automakers with EV segments reported record deliveries in the third quarter, but that could mark one of the pivotal crossroads periods for the sector.
After setting records with 1.3 million electric vehicles sold in the U.S. in 2024, a new estimate from Cox Automotive predicts 1.275 million EVs will be sold in the country in 2025, as reported by InsideEVs.
This marks a potential decline of 2.1% year-over-year in the U.S., which would be the first annual decline since 2019.
The expiration of the federal tax credit at the end of the third quarter has led to a demand collapse in the fourth quarter. Cox Automotive estimates that 230,000 electric vehicles will be sold in the fourth quarter, down 46% from a record third quarter and down 37% year-over-year.
“The year was defined by extreme volatility driven by policy change,” Cox Automotive Director of Industry Insights Stephanie Valdez Streaty said.
The year-over-year decline in electric vehicle estimates comes with a prediction that the overall vehicle market will be up 2% year-over-year for the U.S.
Cox Automotive’s prediction for electric vehicle sales in 2025 was 1.6 million units at the end of 2024.
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Policy Shifts, Demand Changes
The electric vehicle market experienced a boom in recent years, with the Tesla Model Y and Model 3 helping to boost popularity and demand in the U.S. That was followed by other automotive companies adding battery-powered electric vehicles to their lineups.
Things may quickly go in the opposite direction with legacy automakers like Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) changing their plans to rapidly build out lineups of electric vehicle options.
Ford recently announced it was ending production of the F-150 Lightning, the bestselling electric pickup truck in the U.S.
The federal EV tax credit helped make vehicles more affordable for consumers and likewise helped boost demand. The credit ended in September after the passing of the Big Beautiful Bill, which was supported by President Donald Trump and Republican members of Congress.
The timing of the expiration led to a record of over 400,000 electric vehicles being bought in the third quarter as consumers took advantage of the last three months to get the federal EV tax credit.
“The policy changes created a reset moment, but the transition continues — just on a different timeline than anticipated,” Valdez Streaty told InsideEVs.
The decline in EV deliveries in the U.S. for 2025 could be a moment to remember, with Cox Automotive predicting that deliveries will hit 1.3 million units in 2026, up from 2025 and back to 2024 levels.
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