The electric vehicle market is about to hit a speed bump it hasn't seen in years. After what looked like an unstoppable rise, 2025 is shaping up to be the year EV sales actually go backward in the United States.
Here's what happened: Tesla Inc. (TSLA) and other EV makers posted massive third-quarter numbers as Americans rushed to buy electric vehicles before the federal tax credit disappeared. That buying frenzy created record deliveries, but it also borrowed from future demand in a big way.
The Numbers Tell The Story
Cox Automotive is calling it now. After the US sold 1.3 million electric vehicles in 2024, they're projecting just 1.275 million units in 2025. That's a 2.1% decline, and the first time since 2019 that EV sales will actually shrink year-over-year.
The fourth quarter is where things get really interesting, and not in a good way if you're selling electric cars. Cox estimates just 230,000 EVs will move in Q4, down a staggering 46% from the record third quarter and 37% from the same period last year.
"The year was defined by extreme volatility driven by policy change," said Stephanie Valdez Streaty, Cox Automotive's Director of Industry Insights.
The irony? While EV sales are expected to fall, the overall vehicle market is projected to grow 2% year-over-year. Electric vehicles are moving in the opposite direction from the broader auto industry.
Back at the end of 2024, Cox had been predicting 1.6 million EV sales for 2025. That forecast has been slashed by more than 300,000 units.
When Policy Meets Reality
The culprit behind this sudden reversal is pretty straightforward: the federal EV tax credit went away in September. That credit made electric vehicles meaningfully more affordable, and its expiration came courtesy of the Big Beautiful Bill, backed by President Donald Trump and Congressional Republicans.
The timing created a predictable but dramatic pattern. Over 400,000 electric vehicles flew off lots in the third quarter as buyers scrambled to claim the credit one last time. Then the well ran dry.
The shift isn't just affecting pure EV companies. Traditional automakers like Ford Motor Company (F) and General Motors Company (GM) are pumping the brakes on their electric ambitions. Ford recently announced it's ending production of the F-150 Lightning, which had been the bestselling electric pickup in America.
The broader EV boom of recent years had been powered by Tesla's Model Y and Model 3 proving there was real consumer appetite for battery-powered vehicles. That success convinced legacy manufacturers to invest billions in building out their own electric lineups. Now those plans are being reconsidered.
A Pause, Not A Reversal
Before declaring the death of the EV transition, Cox Automotive is predicting this decline will be temporary. They expect sales to bounce back to 1.3 million units in 2026, essentially returning to 2024 levels.
"The policy changes created a reset moment, but the transition continues — just on a different timeline than anticipated," Valdez Streaty explained.
In other words, think of 2025 as a market correction rather than a fundamental change in direction. The question for automakers and investors is whether this one-year setback forces any permanent changes in how aggressively companies pursue electrification strategies. With major players already scaling back production and shifting timelines, the answer might be yes.