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It’s easy to assume that electric vehicles are finally gaining traction in the US.

Indeed, purchases of battery-powered cars topped 1.2 million in the previous year, more than five times the number just a few years ago.

Sales of hybrid vehicles have surged by a threefold.

Electric vehicles accounted for 10% of overall sales in August—a new high, according to industry data.

And, updates to shareholders this week from major automakers and others all showed unprecedented EV sales over the last quarter.

This marked a bright spot in an sector wrestling with the effects from still high interest rates and buyers on edge over inflation, import taxes, and the wider economy.

Analysts Point to a Temporary Boost

However analysts say the boom was driven by a dash to buy before the expiration of a federal incentive that helped knock as much as $7,500 off the price of eligible battery electric, plug-in hybrid or fuel cell vehicles.

Now that the incentive has expired as of the close of last month, carmakers are expecting demand to shift into reverse.

"We expect a vibrant industry, but it's going to be more limited, significantly reduced than we anticipated," a top industry leader stated recently.

"We anticipate that EV demand is going to drop off sharply," another official added, explaining it would require time to see how soon buyers would come back.

US Trails International Adoption

Even with the latest increases, the US, the second-largest auto market globally, stood out as a laggard in electric car sales relative to many other nations.

In the UK, for example, purchases of battery electric and hybrid cars accounted for nearly 30% of new sales in the previous year, while in Europe, they represented roughly one in five sales.

Across China, the largest auto market worldwide, adoption of these vehicles accounted for almost half of total sales last year, and they are projected to exceed half in the current year.

Take-up in some other countries Norway and Nepal is even greater.

Electric vehicles tend to account for a lower percentage of sales in Latin America, Africa and additional Asian nations—but growth there has been surging.

Government Differences

Analysts say uptake in the United States has been hindered by comparatively weak federal backing for the industry, which has restricted the types of incentives, exchange schemes, and regulations that have supported the sector in places such as Europe and Asia.

Earlier leadership pushed hard to increase take-up, aiming for electric cars to account for half of all sales in the United States by 2030.

Officials at the time tightened standards on pollutants, increased interest through public sector acquisitions, encouraged manufacturers to invest with loans and grants for EV investments, spent billions building charging stations, and expanded the $7,500 incentive as a sweetener for buyers.

Supporters framed these actions in part as a strategic necessity, warning that without these US carmakers would risk losing out to competitors from abroad.

But, recent leadership has moved to scrap several policies, including the $7,500 credit, arguing that they were pressuring people to buy vehicles they would not normally want.

"We're saying ... you're not going to be required to make all of those cars," one official said this summer, while signing a bill aimed at striking down rules that would have phased out sales of gasoline vehicles in a major market by 2035. "You can make them, but it'll be by the market, shaped by consumer choice."

Cost Is Still a Barrier

EVs have become more affordable in the United States in recent years—but they remain pricier than comparable petrol-powered vehicles.

Moreover, Chinese carmakers like a leading brand, which have gained share in other markets thanks to low prices, have been largely excluded of the American market, due to high tariffs on cars imported from China, backed by the last two presidential terms.

As of August, the average transaction price of an EV in the United States was over $57,000, approximately 16% more than the typical price for all vehicles.

The most affordable battery car on offer, one popular model, costs about $30,000. In contrast, multiple options can be purchased for under £20,000 in the UK.

Future Outlook

Experts believe what consumers choose next hinges on how carmakers adjust pricing in the months ahead, as they face not only the expiration of the tax credit but also tariffs on foreign cars and certain car parts introduced this spring.

One automaker said this week it would counteract the loss of the incentive by lowering the price for its range of electric models. But another indicated the price for leasing options of some of its cars would increase.

One industry analyst said she did not expect to see most companies follow this approach, given the pressures from tariffs.

Although some buyers may choose EVs regardless, "the coming year is going to be challenging," she warned, noting that her firm is calling for overall car sales to fall by roughly 2% in 2026.

"It would have been challenging if all you had to manage is new tariffs, but with new tariffs and the subsidy expiring, there's a double effect."

Spending Pullbacks

Automakers had previously scaling back their investments in electric cars.

Researchers say recent policy changes could further limit those commitments even more.

"It's a big hit to the electric vehicle sector—it can’t be ignored," noted an industry expert.

"The subsidies were originally a way to create fairness and now that they're gone the US has a significant progress to achieve."

However, a different expert said she was hesitant to label the US lagging in an sector still exploring different options.

"Is [electric] really the right thing?" she said. "Saying that we're behind presumes that EVs are the sole answer and I think it's a little early to say that."