EV Demand Surges Ahead of Tax Credit Expiration as Auto Market Tightens

• EV demand surged in August as shoppers rushed to buy before the $7,500 federal tax credit expires Sept. 30; new EV days to sell fell 3.8% YoY while inventory grew just 1.4% YoY.
• Used EVs moved quickly, too, with inventory up 38% YoY but days to sell dropping to 46 days; Tesla’s 16.2% YoY price drop pulled overall used-EV prices down 3.8%, while other brands rose 0.9%.
• New-vehicle sales rose 3% YoY in August (SAAR 16.1M), but inventories fell 6.4% YoY, reversing nearly three years of recovery; average new-car prices stayed flat at ~$49K for the 23rd month.
• Affordable models are disappearing: Vehicles under $30K now make up only 13.4% of inventory, down from 38% pre-pandemic, with supply shrinking 12.6% YoY, nearly double the overall decline.
• Used-car market tightens: Supply fell 2.7% YoY, days to sell dropped to 49 days, and prices rose 2.5% YoY, as shortages of 1-6-year-old vehicles continue to constrain availability.

U.S. car shoppers are snapping up electric vehicles at a faster pace this fall, racing to take advantage of federal tax credits that expire at the end of September. The rush comes as the broader auto market faces shrinking inventories, steady but elevated prices, and fewer affordable options for budget-conscious buyers.

EV Sales Accelerate Ahead of Incentive Deadline

New EVs are selling quicker, with average time on dealer lots down 3.8% from the same time a year ago. The change reflects consumers moving early to secure purchases before the $7,500 federal EV tax credit disappears — a discount worth about 11% of an average EV’s price.

Inventory has continued to grow, but slower. New EV supply rose 1.4% year over year in August, the second straight month of single-digit growth after nearly three years of steady increases. Excluding Chevrolet and Honda — which scaled back after heavy stockpiles last year — EV inventory rose 8.2% YoY.

Shoppers now have 77 EV models to choose from, up from 62 last year, but more luxury options have pushed the average EV price up 4.1%. Several automakers, including Mercedes-Benz, Honda and Ford, have recently delayed or canceled EV launches, citing uncertainty over future demand once subsidies end.

Used-EV supply has grown 38% YoY as more models return from leases, yet they are selling faster, averaging 46 days on lot, down from 66 last year.

Prices are split: Tesla, which makes up a third of the used-EV market, saw average prices fall 16.2% YoY, dragging overall used-EV prices down 3.8%. By contrast, prices for all other brands rose slightly (0.9% YoY). Entry-level used EVs under $25,000 — often paired with the soon-to-expire $4,000 used-EV credit — are turning the quickest.

Prices Stable, But Tariffs Could Change That

New-car sales rose 3% in August compared with a year ago, pushing the industry’s annualized sales pace to 16.1 million. But behind that growth, inventories are beginning to tighten. After nearly three years of steady recovery from pandemic-era shortages, supply is down 6.4% YoY and flat year to date as automakers pull back amid tariff uncertainty. Prices have held remarkably steady at around $49,000 for 23 straight months, with automakers absorbing higher costs to shield consumers. That strategy may not last, as analysts expect prices to climb between 4% and 12% once tariffs are fully passed through.

Where cars are built is shaping these dynamics. U.S.-assembled vehicles, which make up 54% of inventory, average about $54,000 and have driven most of this year’s price increases. Mexican-built vehicles, which account for 19% of supply, average just over $40,000 but are down 14% year to date as a 25% tariff and trade negotiations weigh on availability. Japanese models, representing 6% of inventory, average around $42,000 and even saw a $1,000 month-over-month price drop, offering some relative relief. South Korean vehicles, about 10% of supply, are the market’s most affordable at roughly $35,000 — nearly $20,000 less than the U.S. average. Canadian-built models, with a 3.5% share, sit closer to $43,000. Meanwhile, European imports, while small in volume at just 6% of supply, average between $70,000 and $96,000 and posted some of the steepest price increases this year.

Trim levels also reflect automakers’ strategies to balance affordability and profitability. Inventory of entry-level trims have stayed flat YoY as brands maintain production of these pared-down versions to appeal to price-sensitive shoppers. But automakers have reduced production of mid-level trims, with inventory share falling 1.1 percentage point YoY, while fully loaded and high-margin top trims have increased 1 percentage point YoY. Affordability remains a key concern. Vehicles priced under $30,000 now make up just 13.4% of inventory, down from 38% before the pandemic and shrinking nearly twice as fast as the broader market. Most of these budget models are built outside the U.S., making them particularly vulnerable to tariffs. 

The broader used market is also under pressure. Supply declined 2.7% YoY in August. Vehicles are selling faster, averaging 49 days on lot, down from 57 earlier this year. Used-car prices rose 2.5% YoY, extending a five-month streak of increases after nearly two years of declines. The shortage of 1- to 6-year-old vehicles, caused by soft new car sales since the pandemic in 2020, continues to restrict supply and keep prices elevated.