U.S. Auto Sales Shift Toward Hybrids One Year After Federal EV Credit Ends

Electric vehicle sales in the United States have dropped sharply since the $7,500 federal tax credit was eliminated on September 30, 2025, a change enacted by legislation signed by President Donald Trump. In the same period, hybrid vehicle sales increased 23% from the second quarter of 2025 to the second quarter of 2026, lifting hybrids’ share of the market to a record 16.3%, up from 13.0% a year earlier.

Cox Automotive reported that overall new-car sales through September 2026 remain near the pace of the first nine months of 2025, with electric vehicles accounting for about 6% of new sales. Used-EV transactions have risen modestly in recent months. The decline in EV sales prompted several manufacturers to cancel production of low-selling electric models, while many shifted marketing emphasis toward hybrid models that appeal to consumers facing gasoline prices above $4 per gallon.

"On the headwind side, rising gas and fuel prices are forcing consumers into difficult trade-offs – when energy costs climb, people prioritize essential spending and push big-ticket purchases, like a vehicle, further down the list," said Jeremy Robb, chief economist at Cox Automotive.

"On the tailwind side, we’re seeing strong growth in liquid assets-savings, money market, and stock holdings outside of 401(k) and IRA accounts have been expanding at double-digit rates in recent years, and that’s bolstering purchasing power, particularly for higher-income buyers," Robb added.

Cox Automotive’s director of Industry Insights, Stephanie Valdez-Streaty, noted that hybrids are gaining market share because they improve fuel efficiency without requiring a major change in fueling habits. Toyota remains the leading hybrid brand with 44% of registrations, though its share has slipped by more than four percentage points over the past year. Ford’s hybrid share fell from nearly 10% to 6%, while Kia and Hyundai are gaining ground.

Automakers have not abandoned long-term electric-vehicle plans. General Motors CEO Mary Barra told Fortune’s “Titans” podcast that the company’s mission remains focused on EVs, describing them as “the endgame.” Ford CEO Jim Farley, in a July 2026 interview, highlighted the upcoming $30,000 Fathom electric pickup as a potential industry-changing product.

Valdez-Streaty said battery technology continues to improve, with average EV range up 20% since 2021 and battery pack prices falling 21% to $108 per kilowatt-hour. She added that charging infrastructure is expanding, contributing to a “complicated picture” where new EV demand is stabilizing, used EVs are reaching more buyers, and hybrids are driving current growth.

The auto market’s evolution suggests a gradual, diversified shift toward electrification, with consumers increasingly selecting among a broader mix of powertrains.