America's EV Market in 2026: Sales Cool After the Federal Tax Credit Ends

The United States electric vehicle market entered a turbulent new chapter in 2026. After years of steady growth fuelled in part by government incentives, the expiry of a major federal tax credit has reshaped how Americans buy electric cars, cooling demand for new models while reshuffling the wider market in unexpected ways.

In this article we look at what happened after the incentive disappeared, how sales of new and used electric vehicles have diverged, why hybrids are suddenly in the spotlight, and what industry forecasters expect for the rest of the year. The numbers tell a story of adjustment rather than collapse.

The end of the federal tax credit

For much of the past decade, a $7,500 federal tax credit helped bring the cost of a new electric vehicle closer to that of a conventional car. Both the New Clean Vehicle Credit and a related commercial credit expired on September 30, 2025, after legislation sunsetted the incentive that had underpinned much of the market's growth.

Before that deadline arrived, buyers rushed to take advantage while they still could. According to the Energy Information Administration, battery electric vehicles reached a record 12 percent of light duty vehicle sales in September 2025, immediately before the credits expired, marking the strongest single month the segment had ever seen.

A sharp drop in early 2026

Once the incentive vanished, the momentum reversed. Cox Automotive reported that new electric vehicle sales fell 28 percent year over year in the first quarter of 2026, dropping to 212,600 units from 296,304 a year earlier. As a result, battery electric vehicles slipped to just 5.8 percent of all new vehicle sales.

The broader car market softened as well, though less dramatically, with total new vehicle sales falling 6.5 percent to 3.67 million units in the quarter. Unsold electric cars also began to pile up on dealer lots, with EV inventory reaching a 130 day supply, far higher than the 89 day supply for gasoline vehicles.

Used electric cars buck the trend

Not all of the news was negative. While new sales tumbled, Cox Automotive found that used electric vehicle sales rose 12 percent year over year in the first quarter of 2026, climbing to 93,500 units from 83,587 the previous year, and up 17 percent from the final quarter of 2025, close to record levels.

Falling prices are helping drive that demand. By February 2026 the average used electric vehicle sold for about $34,821, only slightly more than the $33,487 average for a used gasoline car, narrowing the gap to roughly $1,300 from more than $10,000 in early 2023. New electric cars, by contrast, still averaged a steep $55,300.

Hybrids step into the spotlight

Many buyers who were not ready to commit to a fully electric car turned instead to hybrids. The Energy Information Administration reported that hybrid electric vehicles reached a record 16 percent of light duty vehicle sales in the second quarter of 2026, gaining ground even though they were never eligible for the federal purchase credit.

Taken together, electrified vehicles of all kinds, including hybrids, battery electric cars and plug in hybrids, accounted for 24 percent of sales in the second quarter of 2026, up from 22 percent a year earlier. The figures suggest that electrification is still advancing broadly, even as the share of pure battery electric models has dipped.

Signs of a second quarter rebound

The spring months brought signs of a tentative recovery. Cox Automotive data showed that 247,226 battery electric vehicles were sold in the United States during the second quarter of 2026, a 14.2 percent increase from the first quarter, even as the segment's overall share held near 6 percent, down from 7 percent a year earlier.

Looking at the year as a whole, Cox Automotive still expects total electric vehicle sales in the United States to exceed one million units in 2026, although the annual comparison with the previous year may remain negative given how much the market had relied on the expiring incentive.

What it means for buyers

For consumers, the picture is mixed. New electric cars are now more expensive to buy without the credit, but the rapidly growing used market and the narrowing price gap with gasoline models are opening up more affordable options, while hybrids offer a familiar bridge for those who remain hesitant about going fully electric.

The road ahead

For now, the American electric vehicle market feels like it is in a holding pattern, adjusting to life without generous federal subsidies. Whether growth reaccelerates will depend on prices, charging infrastructure and new models, but the longer term shift toward electrified driving appears set to continue, even if the road is bumpier than before.