U.S. EV sales rose in the early 2020s, then sharply decelerated heading into 2024. After a ~10% drop in 2020 versus 2019 amid the pandemic, EV sales were up 114% y/y in 2021. Growth remained high at 57% in 2022 but slowed to about 40% in 2023 as the market began to mature. In 2024, U.S. EV sales grew 9%, and the first half of 2025 was essentially flat compared with the same period in 2024. This marked deceleration indicates that the early-adopter phase of EV demand has given way to a more hesitant mass-market audience.

The September quarter will receive a one-time boost, as demand that might have landed in 2026 or 2027 was pulled forward ahead of the expiration of the $7.5k  tax credit, which effectively lowers EV prices by about 15%. Whatever positive EV sales figures are reported for September will likely be dismissed by investors as one-time.

As for EV penetration, the percentage of cars sold in the U.S. that are fully electric has been inching higher each year. Based on data from Cox Automotive, JD Power, and Tesla, the share of EV-only sales was:

• 2020 – 2%
• 2021 – 3%
• 2022 – 5%
• 2023 – 7%
• 2024 – 8%
• 2025 (first half) – 7%

The expiration of the credit is expected to further dampen sales in the coming quarters. GM’s Mary Barra, told the WSJ that many consumers remain wary of EVs’ cost and charging limitations, remarking that “the customer was telling us they weren’t ready.” With the incentive gone, a drop in EV demand should be expected in the next couple of quarters.

Around 2021, many legacy automakers were touting aggressive electrification roadmaps. General Motors, for example, announced plans to launch 30 new EV models by mid-decade and publicly pledged to phase out gas-powered cars by 2035. Ford and Volkswagen made similarly ambitious commitments, targeting a large share of their sales to be electric by 2030.

By 2025, the tone has shifted. Faced with softening EV demand and mounting losses, traditional automakers have dialed back investments. GM and Ford have each delayed or scaled back high-profile EV models and battery factory projects that were announced at the height of EV enthusiasm. Mary Barra, once one of the industry’s loudest EV champions, no longer reiterates GM’s 2035 all-EV target and now emphasizes that the transition will “take decades.” Instead of converting more factories to EV production as originally planned, GM has shelved dedicated EV plant projects and doubled down on updates to its V-8 truck engines.

My latest projections call for 25% of new cars sold in the U.S. in 2030 to be electric. This is well below my earlier forecast of 50% from 2020.

I believe the softening of consumer enthusiasm reflects several factors. The years 2020 through 2023 represented a pull-forward of demand as early adopters who had been waiting for viable EV products finally bought in. Once that group was satisfied, the challenge shifted to convincing more skeptical buyers, many of whom still struggled with range anxiety. Over the past six months, political momentum has swung back toward gasoline, and Tesla’s brand damage further softened demand. Whatever the reasons, EV sales have slowed and are expected to be about flat this year. Excluding the September bump from the credit expiration, sales will be down about 5% y/y in the U.S.

This slowdown has translated into automakers pulling back on electrification. Volkswagen’s U.S. division once aimed for more than 50% EV sales by 2030 but recently lowered its target to 20%. Other carmakers have been less explicit with updated numbers, but their actions tell the story. GM no longer sets a firm date for ending gasoline vehicle sales, and Ford now emphasizes reaching EV profitability later this decade rather than dominating market share.

The retreat is also visible in policy stances. GM shifted from cooperating with regulators to actively lobbying against stricter emissions standards, successfully pushing for rules that shield automakers from penalties if they miss fuel economy targets. Toyota and Honda have delayed pure EV launches in favor of hybrids.

One glimmer of hope from traditional automakers is that some still acknowledge the long-term potential of EVs. In May, GM CEO Mary Barra remarked at the WSJ Future of Everything event, “I do believe we’ll get there … because I think the vehicles are better.”

Over the past month, I was surprised when two friends of mine bought a Model Y. One was a grandmother, the other a man in his early fifties. Aside from not expecting them to go electric, a decision made easier by the tax credit and a now or never mentality, what stood out most was that their first comments had nothing to do with going electric. Instead, they were focused entirely on how impressed they were with Full Self-Driving, offered as a three month free trial. While anecdotal, this highlights a broader reality: the value of EVs is increasingly shifting toward autonomy.

The push toward self-driving cars adds a critical dimension to automakers’ EV strategies. I view autonomy as the “killer app” of mobility. The benefits of autonomy, from FSD to potential robotaxi networks, are best realized when paired with EVs. This creates a catch 22: by slow playing the shift to EVs, traditional carmakers may save money in the near term, but they risk being caught offside when the rollout of autonomous technology accelerates, a milestone I expect in the next couple of years.

The bottom line: If autonomy takes off within the next five years, legacy automakers without a profitable EV lineup will find it nearly impossible to fully capitalize on it.

In the end, the expiration of the U.S. tax credit will likely prove to be a win for Tesla, as it lured traditional automakers into slowing their EV investments, giving Tesla a stronger position to capture the benefits of autonomy.

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