Goodbye to the $7,500 EV tax credit. What’s that mean for EV prices?

By CNN Newsource

Published September 23, 2025 5:00 AM

By Chris Isidore, CNN

(CNN) — Sales of electric vehicles in the United States are almost certain to tumble when the $7,500 federal tax credit for EV buyers expires on October 1. But where prices go is less certain.

The tax credit, passed by the Biden administration in 2022 to support EVs, is going away Wednesday as part of President Donald Trump’s broad spending and tax bill. The loss will cut into demand for EVs, which means prices in real terms will immediately rise — a concept not lost on the many consumers who rushed to buy EVs in August and September.

That surge could result in plunging sales in the final three months of the year. As a result, automakers are weighing where to set sticker prices and incentive levels to maintain demand, which could lead to lower EV prices. But it’s not clear how much total savings the changes will provide, and likely won’t make up for the money lost from the end of the tax credit.

Automakers either didn’t respond to CNN’s request for comment on their pricing plans or said they would monitor market conditions.

But history can be a guide. In 2019, when a previous version of the EV tax credit was phased out for Tesla and General Motors because both hit a prescribed sales target, those two automakers responded by cutting prices.

EV sales have been growing steadily for years, and at a much faster pace than traditional gas-powered cars. US EV sales in 2024 rose 7% to 1.6 million, according to the Bureau of Transportation Statistics (BTS), more than three times as fast as the 2% for non-electric passenger vehicles.

But sales of EVs in the United States began to slow earlier this year, rising only 1.5% during the first six months, according to Cox Automotive. That had prompted automakers to offer attractive deals, especially over lease terms.

With the tax credit loss, even more attractive offers are likely on the way, predicted Ivan Drury, director of insights at car buying site Edmunds.

“If you already can’t sell the vehicles at current prices, there’s no way you are going to sell them at today’s prices with this credit going by the wayside,” he said.

Drury believes the price relief will either come through a lower sticker price, or better financing terms and cash-back offers for buyers.

Automakers are also likely to respond to a drop in demand by cutting production of EVs. That could mean limited availability of some vehicles on dealer lots, and therefore less pressure to lower prices, said Stephanie Valdez Streaty, director of industry insights at Cox Automotive.

But she also said automakers will face pressure to cut their prices to maintain some basic level of sales of their EV models.

“I think we’ll see some of that (price cuts and incentives) to keep the buying going,” Valdez Streaty said, adding that the loss of the tax credit won’t kill all demand.

Cox found that 65% of car buyers intending to purchase an EV in the next two years said they’ll go ahead with those plans, even without the tax credit. Only 20% said they would purchase a hybrid or traditional gas-powered car instead.

The same survey reports that vehicle performance, fuel and maintenance savings, as well as concerns about the environment were all more important factors to buyers than the tax credit itself.

And the EV tax credit doesn’t apply to all models. It’s not eligible for vehicles with a manufacturer’s suggested retail price (MSRP) of greater than $80,000, so the expiration won’t necessarily affect the demand of many of the larger trucks or luxury models.

Also, unless Americans buy a vehicle from Tesla, which sells directly to consumers, most buyers will go through a dealership. Dealerships negotiate the transaction price with a buyer, which means what EV buyers will eventually pay will be something of a “moving target,” said David Green, industry analyst for Cars.com.

“I think there’s going to be a little bit of turmoil in the market for quite some time,” Green said.