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Consumers are racing to buy electric vehicles before a fast-approaching deadline to claim tax credits worth up to $7,500, according to auto analysts.
Legislation championed by Republicans on Capitol Hill and signed by President Donald Trump in July eliminates the tax breaks — available for new, used and leased EVs — after Sept. 30.
The Biden-era Inflation Reduction Act had originally offered the tax breaks to consumers through 2032.
“We’re expecting Q3 may be [a] record for EV sales because of the tax incentives going away,” said Stephanie Valdez Streaty, a senior analyst at Cox Automotive.
“People are rushing out” to buy, she said.
‘Significant volume’ of EV sales
Consumers purchased nearly 130,100 new EVs in July, the second-highest monthly sales tally on record, behind roughly 136,000 sold in December, according to Cox Automotive data. The July figures represent a 26.4% increase from June and nearly 20% increase year-over-year, Streaty said.
The share of EV sales in July also accounted for about 9.1% of total sales of passenger vehicles that month, the largest monthly share on record, according to Cox.
“We’re seeing significant volume in new EVs,” said Liz Najman, director of market insights at Recurrent, an EV marketplace and data provider.
Meanwhile, there were nearly 36,700 used EVs sold in July, a record monthly high, Cox data shows.
Specific EV models — the Chevy Equinox EV, Honda Prologue and Hyundai IONIQ 5 — also saw record-breaking sales last month, Najman said.
There were 8,500 Equinox EVs sold in July, the highest monthly EV total in the U.S. for any model outside of Tesla, which is the market leader, Najman said.
(This comes as Tesla’s sales have declined for two consecutive quarters, by about 12% year-over-year in Q2 and 9% in Q1, according to Cox data.)
$7,500 tax credit puts EVs near price parity
The tax credits — worth up to $7,500 for new EVs and $4,000 for used EVs — aim to make EV purchases more financially enticing for consumers.
The EV tax breaks were one of many policies the Biden administration adopted to try try to cut U.S. greenhouse gas emissions. The transportation sector is the largest source of U.S. greenhouse gas emissions.
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EVs are “unambiguously better” for the environment than traditional cars with an internal combustion engine, according to the Massachusetts Institute of Technology.
However, while EVs tend to be cheaper over the lifecycle of car ownership relative to traditional gasoline vehicles, they generally carry a higher upfront cost, analysts said.
The average transaction price for all new passenger vehicles (aside from battery electric vehicles) in July was $48,078, according to Cox data.
The average for new EVs was $55,689, before any dealer incentives and tax credits, Cox said. If the purchase were to qualify for the full $7,500 tax credit, it’d be near price parity, around $48,189.
The price gap between EV and gasoline cars “no longer exists,” Tom Libby, an analyst at S&P Global, wrote in July. The disappearance of the federal tax credits “jeopardizes” price competitiveness, he wrote.
States and utilities may offer additional financial incentives for EVs, depending on where consumers live, analysts said.
EV dealers boost incentives
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Dealers are also seeking to capitalize on the upcoming Sept. 30 deadline, stoking a sense of consumer urgency to boost sales, analysts said.
“$7,500 Federal Tax Credit Ending,” was in bold lettering at the top of Tesla’s home page as of early afternoon Friday. “Limited Inventory — Take Delivery Now,” the automaker wrote underneath.
Sept. 30 is the date by which consumers must take ownership of the car (essentially, be driving it off the lot) to qualify for an EV tax credit.
Beyond the tax breaks, dealers are also offering relatively generous financial benefits to entice consumers.
They provided about $9,800 of additional financial incentives, on average, to new-EV buyers in July, worth about 17.5% of the average transaction price, Cox data shows.
That share is the highest percentage dating to October 2017, which was before the “new era of EV adoption” when monthly sales volume was quite low, Streaty said.
EV sales are likely to “collapse” in the fourth quarter of 2025, once the tax credit expires and the market adjusts to a new financial reality, she said.
Used EVs are likely to be a bright spot in the near term, analysts said.
Growth has been accelerating, and most buyers today already don’t qualify for the $4,000 tax break.
“[A]pproximately one-third of used EVs qualified for the incentive anyway,” Cox Automotive wrote last month. “With availability growing and incentives for new EVs expected to fall, the used EV market may grow faster in the quarters ahead.”