Federal tax credits for electric vehicles in the US officially ended on Wednesday, closing a chapter that helped lower up-front costs, nudge hesitant buyers, and give automakers confidence in demand. Expanded and extended under the 2022 Inflation Reduction Act, the incentives arrived as battery-electric vehicles still represent a small share of new US sales, even as transportation contributes roughly 30 percent of national greenhouse-gas emissions. While lifetime costs for electric vehicles can undercut gas-powered models thanks to fuel savings, higher purchase prices have been a persistent barrier that credits and rebates were designed to address.
Germany provides a cautionary case study. Its national incentive program, launched in 2016, offered grants of up to about €6,000 for new battery-electric or plug-in hybrid vehicles. The pullback was gradual at first, ending support for plug-in hybrids in 2022 and removing eligibility for commercial buyers in September 2023, before the government abruptly terminated all incentives in December 2023 with roughly a week’s notice. Sales data showed sharp boom-bust swings around each policy change, with peaks ahead of cuts followed by steep declines. Battery-electric sales in Germany were about half as high in January 2024 as in December 2023. A similar pattern is already visible in the US: electric vehicles reached about 10 percent of new sales in August, with analysts expecting September to be record-breaking as buyers rushed to claim credits. The next few months could be markedly weaker, with one analyst telling the Washington Post that the share could fall to the low single digits, “like 1 or 2 percent.” As researcher Robbie Andrew of the CICERO Center for International Climate Research put it, the key unknown is how long the decline lasts and how quickly growth recovers.
Germany’s longer-term trajectory also offers lessons. After incentives ended, battery-electric vehicles fell to 13.5 percent of new registrations in 2024 from 18.5 percent the year before, and the UK overtook Germany as Europe’s largest electric vehicle market. While sales in the first half of the year beat records set in 2023, growth would need to accelerate significantly to reach the goal of 15 million battery-electric vehicles on the road by 2030. As of January 2025, there were 1.65 million. For the US, early projections suggest the end of federal credits could slow progress substantially: Princeton University’s Zero Lab estimates battery-electric vehicle sales in 2030 could be about 40 percent lower without the incentives. Some states still offer their own programs, but without federal backing the US is likely to lag leaders like China. From a climate perspective, Andrew noted, with road transport responsible for almost a quarter of US emissions, leaving low-hanging fruit unpicked is a significant setback.
