The electric vehicle market in the U.S. is surging ahead of the expiration of the federal EV tax credit on September 30. There is clear evidence that buyers are rushing in to purchase EVs before losing up to $7,500 in incentives. Notably, EV market share rose to 9.1% of the total market in August to approach a record high. The EV penetration rate for September could top 10%, according to some forecasts.
Of course, the long-term outlook is less rosy, as analysts and industry insiders widely expect EV sales to drop sharply in Q4 and into 2026 once the tax credit is no longer available. Detroit automakers General Motors (GM) and Ford Motor (F) have already started to scale back EV production, anticipating slower demand with government support for the EV industry being sharply reduced, while Tesla (NASDAQ:TSLA) CEO Elon Musk has made it clear that the company’s future value is in autonomy and AI.
However, Tesla (NASDAQ:TSLA) still derives most of its revenue from auto sales, which raises the stakes for the next few quarters. After delivering 336,681 vehicles in Q1 and 384,122 vehicles in Q2, the Austin-based company is expected to report a strong Q3 deliveries tally of around 431,000 vehicles due to the spike in demand ahead of the federal EV tax credit expiration. However, the range from the top end of the deliveries forecasts from Wall Street analysts to the bottom end is larger than it has been in three years, which could add some trading volatility.
The short-term boost in electric vehicle demand is also expected to help Rivian Automotive (NASDAQ:RIVN) and Lucid Group (NASDAQ:LCID) in Q3. Shares of Rivian (NASDAQ:RIVN) are up 16% over the last six weeks, while Lucid (NASDAQ:LCID) has peeled off 10.5%.
Not everyone is convinced that the EV outlook is dire. The contrarian view is that the high penetration rate of EV adoption globally will make its way to the U.S. and that a notable percentage of EV buyers are not impacted by the repeal of the EV tax credit.