Buckle up for a ‘strange moment’ in the US electric vehicle market, even as global sales soar

The auto industry has seen slowing growth in U.S. electric vehicle sales in 2024, largely due to longtime leader Tesla losing ground.

How things play out in 2025 will largely depend on what happens in Washington, where the new Trump administration aims to repeal or revise incentives for electric vehicles.

But the long-term trajectory has changed little, as the world continues to shift from gasoline to electric motors, a transition whose technological and economic advances are too great to be reversed by a single country or leader, analysts say. The biggest uncertainty is the pace.

In 2024, U.S. consumers purchased 1.3 million electric vehicles, a 7.3% increase from the previous year, according to Kelley Blue Book and Cox Automotive. Figures do not include hybrids.

Electric vehicle market share accounted for 8.1 percent of U.S. car and light truck sales, an increase of 0.3 percent.

“Growth has slowed,” said Sean Tucker, editor-in-chief of Kelley Blue Book. “But it’s a complicated two-word phrase, because the growth didn’t stop at any point. It slowed down.

The main thing hurting sales was “Tesla’s shrinkage problem,” he said, describing the company’s declining numbers. Tesla has long remained the country’s electric vehicle leader, but its sales of 633,762 vehicles fell 5.6% from the previous year.

Tesla’s problems included a line of vehicles whose top sellers hadn’t received major updates in some time. The newly introduced Cybertruck recorded decent numbers, with 38,965 vehicles sold, more than any other electric truck. But these gains were canceled out by the drop in sales of the brand’s two flagship models, the Model Y and the Model 3.

Other automakers closed the gap, including Ford, which finished second behind Tesla with sales of 97,865 electric vehicles, an increase of 34.8%. Kia, Honda and Cadillac were among many other automakers that saw large percentage increases in their electric vehicle sales.

Notable new models in 2024 included the Cybertruck, Chevrolet Equinox EV, and Honda Prologue.

Global sales of electric vehicles have been growing at a much faster rate, with 17.1 million vehicles sold in 2024, an increase of 25%, according to Rho Motion, a UK-based research company. These figures include plug-in hybrids.

China leads with 11 million vehicles sold, an increase of 40 percent. Europe is down, with 3 million units sold, a drop of 3%, due in part to the reduction or removal of some incentives for purchasing electric vehicles. The United States and Canada recorded combined sales of 1.8 million, up 9 percent.

“What is clear is that government carrots and sticks are working,” Charles Lester, Rho Motion’s chief data officer, said in a statement.

He was referring to incentives, such as the tax credit of up to $7,500 for buyers of certain plug-in vehicles in the United States. The incentives help make electric vehicles more affordable, negating much of the price difference between electric models and their gasoline-powered equivalents.

Fewer vehicles will be eligible for the U.S. credit in 2025 than in 2024 due to increased eligibility standards under the Inflation Reduction Act. Automakers must meet standards designed to encourage the assembly of vehicles and batteries in the United States and the use of battery components sourced from the United States and its allies.

There are now 23 vehicles eligible for the $7,500 credit, down from 49 vehicles that received the full or partial credit at the end of 2024. The Tesla Model Y and Honda Prologue are among the main models still eligible.

Rivian and Volkswagen are among the automakers that qualified previously but are not doing so now. But that could change if companies make changes to meet the standards.

The tax credits are intended for people who purchase the vehicles. The rules are different for electric vehicle leases, with automakers able to get a $7,500 credit with few eligibility limits. Most automakers use electric vehicle lease credits to reduce lease costs.

The result for consumers is that they can get the equivalent of the credit by leasing a model that would not be eligible for the credit if purchased.

Tax credits, whether for leasing or purchasing electric vehicles, are among many incentives and policies that could disappear or be severely changed by the Trump administration. But because there’s no certainty about what might happen, analysts aren’t sure what to recommend to customers.

“It’s always been difficult to predict the future, but we’re particularly heading toward some uncertainty now,” said Moaz Uddin, senior electric vehicle policy specialist at the Great Plains Institute, a nonprofit based in Minneapolis that is conducting research and advocating for a transition. to carbon-free energy.

But forecasters make their best guesses. BloombergNEF analysts expect U.S. electric vehicle sales to increase “moderately” in 2025, according to a customer report released Jan. 13. This reflects the belief that the Trump administration will have to take some time to go through the process of repealing the electric vehicle tax credit.

Chris Harto, senior policy analyst for Consumer Reports, said it’s a difficult time for people trying to decide when to buy an electric vehicle. He advises against panic buying for fear of tax credits disappearing, but believes now is a good time to buy for people who have done enough homework to have a good idea of ​​which vehicle will meet their needs. needs.

“It’s definitely a strange time,” he said.

Although a lot could change in the short term, Harto sees little change in the long-term trajectory. He is one of many analysts who see the shift to electric vehicles as inevitable.

“Technology is moving in such a direction that there is almost nothing that can be done to prevent more affordable electric vehicles from coming to market,” he said.

Automakers that want to compete globally will need to have strong electric vehicle lineups or they will cede the market to China, he said. The immediate challenge for companies will be to survive this period where the transition to electric vehicles is expensive and U.S. policies are far from certain.

“It’s really hard for me to predict the next year or two,” he said. “I think it’s going to be very difficult for anyone to predict.”