U.S. EV Sales Fall as Automakers Scale Back Battery Plans

U.S. sales of fully electric vehicles fell 27% from a year earlier in the first quarter of 2026 to about 216,000 vehicles, reducing their share of new-vehicle sales to 5.8%. The decline followed the expiration of the federal purchase credit and coincided with policy changes, uneven charging access and shifts in automakers' product plans.

The trigger is easy to pinpoint. The federal government's $7,500 EV purchase credit expired on September 30, 2025, wiped out by the One Big Beautiful Bill Act, and nothing has replaced it. Buyers who wanted to cash in rushed to close deals before the deadline, which briefly inflated sales last fall — and set up an inevitable hangover once the incentive actually disappeared.

Factors beyond the tax credit

Losing the credit alone probably wouldn't have caused this much damage. Researchers at UC Davis's Institute of Transportation Studies estimate the incentive's expiration should have dented demand by 20% at most — yet California, the country's biggest EV market, saw electric vehicle share of new registrations plunge from 21% in 2025 to just 13.7% in the first quarter of 2026, a steeper drop than the tax credit alone can explain.

Part of the gap comes down to automakers themselves pulling back rather than pure buyer reluctance. Alongside the tax credit, regulators also eliminated financial penalties for automakers that missed fuel-economy and emissions targets — rules that had effectively forced legacy carmakers to keep building EVs whether demand justified it or not. With that pressure gone, several manufacturers cut back on electric models rather than fight for a shrinking pool of buyers, trimming the very selection that might have kept sales afloat.

Battery projects are being delayed

The slowdown has rippled straight into the factories meant to build America's electric future. Ford put one of its planned Kentucky battery plants on indefinite hold. GM decided it only needs three battery plants instead of the four it once planned, selling off one site to LG while keeping two joint-venture facilities running under its Ultium brand. LG itself pushed back a $5.5 billion battery plant in Arizona that was meant to supply Tesla and Rivian, and BMW's battery partner paused construction on a $1.6 billion cell factory in South Carolina.

Volkswagen went a step further, announcing in April that it would stop building its all-electric ID.4 SUV at its Chattanooga, Tennessee, plant entirely — a facility the company had sunk $800 million into and which had been the first US site to build and sell a Volkswagen EV. Collectively, legacy automakers have absorbed tens of billions of dollars in charges against their earnings as they scale back electrification plans that once looked like sure bets.

How dealers are managing inventory

Walk onto almost any dealer lot right now and the glut is hard to miss. New EV inventory has swelled to about 130 days' supply nationally, roughly 46% higher than the 89-day supply of gas-powered vehicles sitting alongside them. To move the metal, automakers are dumping an average of nearly $5,700 per EV into incentives, more than double what they typically spend pushing hybrids and well above what gas vehicles get.

Even Tesla, still comfortably the market leader, hasn't been immune. Its US registrations dropped double digits earlier this year even as its share of a shrinking EV pie actually grew, a sign that the entire category is contracting rather than any one brand losing a competitive fight. Toyota, Rivian, Cadillac, and Subaru stand out as rare bright spots posting sales gains, while buyers priced out of new EVs are increasingly flocking to the used market instead, where prices are edging closer to parity with gas-powered cars.

Why some analysts expect demand to recover

Not every analyst reads the slump as a verdict on EVs themselves. Cox Automotive's Stephanie Valdez Streaty has described this stretch as the market finally discovering what natural, subsidy-free demand for electric vehicles actually looks like, rather than a sign that Americans have soured on the technology for good. Researchers studying California's market point out that most people who buy one EV go on to buy another, suggesting the underlying appetite hasn't vanished so much as gone quiet while automakers and buyers alike adjust to a world without the government thumb on the scale.