The US electric vehicle market faces the risk of a sharp decline.
A new survey suggests that demand for electric vehicles in the U.S. could halve if the government ends tax incentives, forcing automakers to lower prices to retain customers.
The growth of the electric vehicle (EV) market in the US over the past few years has been largely driven by government tax incentives. However, a recent study shows that this reliance is so significant that demand could plummet dramatically once these financial subsidies are removed, indicating that price remains a major barrier for consumers.
Financial factors are the deciding factor in the choice.
According to a survey conducted by The Harris Poll from September 23 to 25 with 2,095 adults, affordability remains the top concern for 64% of car buyers. Among those intending to buy or lease a car, about 29% said they would likely choose an electric vehicle.
Notably, the study indicates that for those who previously owned electric vehicles but later switched back to gasoline or hybrid cars, financial incentives play a decisive role. Specifically, 60% of this group stated they needed at least $5,000 in assistance to consider returning to electric vehicles. Approximately 30% desired incentives between $2,500 and $4,999, and only 11% were willing to accept less than $2,500. This figure suggests that the previous $7,500 tax credit for new vehicles and $4,000 for used vehicles offered by the US government significantly impacted their purchasing decisions.
Greg Paratore, a senior consultant at The Harris Poll, noted that changes in incentive policies could significantly reduce demand, but also create opportunities for manufacturers to rebuild trust by sharing the cost burden with consumers.
Reactions from manufacturers
Faced with declining purchasing power, automakers have quickly adjusted prices. Hyundai is a prime example, announcing a price reduction of $9,800 for the 2026 Ioniq 5 model after it no longer qualifies for tax incentives. The South Korean automaker is also offering an additional $7,500 in cash to customers purchasing remaining 2025 Ioniq 5 models.
Meanwhile, Tesla also introduced more affordable, standard versions of the Model Y and Model 3 to reach new customer segments. However, this price war also had negative consequences, reducing the resale value of previously purchased vehicles and impacting early adopters.
An uncertain future
Ford CEO Jim Farley has warned that demand for electric vehicles in the U.S. could halve if incentives are completely eliminated. If this scenario occurs, the electric vehicle market share could revert to around 5%, the level seen in 2022 before widespread financial assistance programs were implemented.
The current situation shows that the relationship between American consumers and electric vehicles remains fragile and heavily dependent on financial factors. The future of this market will largely depend on manufacturers' pricing strategies and their ability to reduce production costs to offer attractive products without government assistance.
