EV Sales Stall in the U.S. While Global Momentum Builds

• U.S. EV sales fell 6.3% in Q2 2025, the third consecutive quarterly decline, amidst growing world EV demand.

• Federal incentive expirations are fueling urgency, and a sales spike is expected in Q3 before incentives evaporate in September.

• Incentives and price headwinds are rising, particularly for traditional carmakers struggling against Tesla's market share.

Global Sales Pick Up, But the U.S. Grinds to a Halt

The electric car market in the first half of 2025 is two different tales. One is one of world growth, led by a 24% jump in worldwide EV sales. The other is one of stagnation in America, where EV sales in Q2 were down 6.3% from last year, a third consecutive quarterly decline.

Despite better infrastructure, more available models, and increased public awareness, U.S. consumers seem to be taking their foot off the pedal for EV adoption, at least on a short-term basis. According to Cox Automotive, the U.S. moved a total of 310,839 EVs in Q2, down from 331,853 for the same quarter last year.

Sunsetting Tax Credits May Change the Tide in Q3

Some of the reason a rebound is anticipated is that the deadline looms near. The federal $7,500 tax credit for individuals purchasing EVs will end for most cars on September 30, 2025. Therefore, manufacturers are ramping up production and inventory in anticipation of a potential sales surge in Q3.

This deadline is already influencing purchase decisions. Some consumers are rushing to buy, worrying that their model of choice will no longer qualify under the changing provisions of the Inflation Reduction Act. Auto manufacturers are also adjusting their advertising in order to create a sense of urgency, promoting "last chance" deals.

Pricing and Incentives Drive New Market Realities

The EV price environment in the United States is also evolving under competitive pressure. Industry leader Tesla has cut prices on some models, leading conventional automakers to match prices or risk losing market share.

In Q2, incentives represented 14.8% of average transaction prices, or over $8,500 per unit in certain segments. This is the highest level of incentives since detailed tracking of EVs started and indicates rising concern among automakers, especially those who do not have Tesla's scale or margins.

General Motors and Hyundai brands are fighting back with aggressive leasing strategies and creative pricing plans. GM alone experienced a 40% increase in EV sales during Q2, outperforming the industry and recovering from Q1.

Global Strength Driven by China, Europe Maintains Resilience

While U.S. expansion is decelerating, China remains to lead in volume and growth pace. The Chinese market contributed nearly 60% of global EV sales during the initial half of 2025. Europe continues to dominate its position on the back of ongoing support policies, available infrastructure, and a wider model line across vehicle classes.

Globally, EV volumes have reached 9.1 million units in H1 2025, and the second half will see even stronger performance, driven by seasonality growth and new government incentives in certain markets.

Tesla and Legacy OEMs Go Different Ways

Tesla's deliveries fell roughly 13.5% year-over-year, primarily due to factory retooling and short-term logistics problems. But it still maintains its solid foundation, particularly in America, where it controls more than 50% of the EV market.

Old-line car manufacturers are facing an increasingly difficult scenario. Increased production costs, lean margins, and changes to federal eligibility have pushed them to redirect strategies. While GM and Hyundai are gaining momentum with new designs, others, especially those who are still in the early stages of electrification, are having difficulty getting started.

Looking Ahead: The Stakes Are High for Q3

With only weeks to go before a key tax credit transition, everyone is looking to Q3. Sales should rise for EVs as consumers rush to buy ahead of incentives drying up. It's not clear, though, if the boost will be robust enough to make up for the broader slowdown in demand.

Automobile manufacturers must handle their pricing, stock, and communication carefully. For others, Q3 will be critical not just for their 2025 profit outlook but also for where they stand in an expanding and increasing competitive EV market.