EV sales dip after tax credit ends, hybrids surge in 2026
One year after the federal $7,500 electric-vehicle tax credit expired, new EV sales have stabilized at 5-6% of the market, while hybrid sales have risen about 27% nationally.
New-vehicle electric-car sales fell sharply after the federal tax credit expired on Sept. 30, 2025, dropping 36% from the previous year and 27% year-over-year in the first quarter of 2026, according to Cox Automotive and Edmunds data. Throughout 2026, EVs have held a steady share of roughly 5% to 6% of all new car sales, a level lower than the 11.4% peak seen in September 2025 when buyers rushed to claim the credit.
Industry analysts say the decline was expected. > "The downfall of the EV has highlighted how good the hybrid is," said Ivan Drury, director of insights at Edmunds. Hybrid vehicles, which combine a gasoline engine with an electric motor, have experienced a 27% increase in sales over the past year, driven by strong demand for models such as Toyota’s Sienna minivan and RAV4 SUV. Toyota dealers in Massapequa, New York, report that hybrids are selling within an average 12-day inventory window, a rate the firm describes as “basically sold out.”
Stephanie Valdez Streaty, director of industry insights at Cox Automotive, noted that hybrids are benefiting from high gasoline prices and the absence of a federal EV incentive. She added that hybrids “are having their moment” and appeal to buyers who want better fuel economy without the range-anxiety associated with pure electric cars.
The discontinued tax credit, created in 2008 and expanded by the 2022 Inflation Reduction Act, had offered up to $7,500 for new EV purchases and $4,000 for qualifying used EVs. Its removal was justified by congressional Republicans as a reduction of “wasteful spending.” The policy change, combined with broader regulatory rollbacks, has slowed EV adoption but not halted it. Used-EV inventory is growing as lease returns enter the market; less than 3% of used cars are electric today, but more than 300,000 used EVs are expected to become available in the next year.
Analysts say the U.S. EV market is moving toward a lower, more stable level of new-vehicle sales, while growth is shifting to hybrids and the used-EV segment. Global competition remains a factor, with electric-vehicle shares exceeding 50% of new sales in China and over 30% in Europe in recent years.