EV Sales Just Crashed After the $7,500 Tax Credit Disappeared
Electric vehicle sales just fell off a cliff. EV and plug-in hybrid market share dropped below 8% in January 2026—down nearly four percentage points from last year—after the $7,500 federal tax credit disappeared on October 1, 2025. Pure EVs now grab just 6.6% of new retail sales, down 2.9 percentage points year-over-year, while plug-in hybrids sank to 0.9%. Average EV transaction prices jumped 18.1% to $51,981, while gas vehicles crept up just 0.9% to $45,510. Your monthly payment? Now $760 on average—up $24 from last year.
Manufacturers are hemorrhaging cash trying to stop the bleeding. Automakers are dumping $5,700 per EV in incentive spending—more than $2,000 higher than last year—trying to replace the lost federal credit. That's nearly double what they spend on hybrids and $2,500 more than gas cars get. Buyers are walking away. EV sales plummeted once the tax credit math flipped, and only 44% of EV transactions are structured as leases now—down 30 percentage points from January 2025.
Gas Cars Win the Discount War
The money automakers saved by selling fewer EVs went straight into gas and hybrid discounts. Non-EV incentives hit $3,004 per vehicle—up $403 from last year—while traditional hybrids are eating up 14.7% of sales, a 1.4-percentage-point gain. Internal combustion engines claimed 77.7% of sales, up 2.7 percentage points from last year. Total new-vehicle sales for January are projected at 1.12 million units, down 2.7% year-over-year. Consumers will spend $39.7 billion on new vehicles this month, but 27.3% of trade-ins now carry negative equity—up 2.4 percentage points—and 11.7% of buyers are stretching into 84-month loans just to make the math work.
My Verdict
If you're shopping for an EV right now, wait until March or April. Dealers are sitting on inventory they need to clear, and manufacturers are still figuring out how to price these things without federal help. Gas cars and hybrids are getting the best deals in years—if you don't need electric range, buy there instead and pocket the savings. If you're committed to electric, charging infrastructure is finally improving, but the price premium without tax credits is real. Run the total cost of ownership over five years—including insurance, maintenance, and electricity costs—before you sign. Don't let dealer incentives distract you from what you'll actually pay.