It's a rough time to be an automaker.
Demand for electric vehicles in the U.S. has cratered since last September, when the $7,500 federal tax credit for EVs expired. The financial losses have forced automakers to write off billions of dollars in investment -- factories, battery technology and new models -- as consumers ignored higher-priced EVs for hybrids.
EVs totaled nearly 12% of the U.S. market in September, a record high. In January, that share dropped to 6%, according to Cox Automotive data. Sales of EVs in the U.S. plummeted 20% in January versus last December.
"2026 will be hard -- the industry is trying to find that natural demand," Stephanie Valdez Streaty, director of industry insights at Cox Automotive, told ABC News. "More than 22 EV models are being launched this year ... manufacturers have been working on these products years in advance. 2026 will be flat in terms of sales."
Did analysts forecast the massive drop-off? Yes, but "the size of the write-offs took people by surprise," Mark Wakefield, global automotive market lead for AlixPartners, told ABC News.
"We've seen the announcements on vehicles being canceled. There's a big reshuffling now by automakers," he went on. "Changes to the IRA [Inflation Reduction Act], changes to the EPA ... this administration for sure killed EVs. That's the direction that administration wanted to go -- less EVs and more ICE [internal combustion engines]."
President Donald Trump has reversed or scaled back climate policies promoted by the Biden administration. Under President Joe Biden, half of all new vehicles sold by 2030 were mandated to be electric. That was revoked as part of Trump's mega bill.
In December, Trump weakened fuel economy standards for automakers, reducing average mpg (miles per gallon) for cars and light trucks to 34.5 from 50.4 miles -- a number set by the Biden administration.
The president has also blocked California's 2035 ban on sales of new gas-powered vehicles. The president's decision to halt funding of the $5 billion National Electric Vehicle Infrastructure (NEVI) program, however, was overturned by a district court judge in August, allowing states to move forward with their charging infrastructure plans.
More recently, the administration walked back an Obama-era environmental decision that was the legal basis for establishing federal regulation of greenhouse gas emissions.
Trump has said the EV mandates "forced automakers to build cars using expensive technologies that drove up costs, drove up prices, and made the car much worse. This is a green new scam, and people were paying too much for a car that didn’t work as well."
So what does that mean for consumers? Are electric vehicles now a niche form of transportation?
Wakefield argued there would have been "a long and steady growth" path for EVs if the current government had supported the industry, though he acknowledged that the market had been propped up by incentives and mandates.
U.S. sales of plug-in hybrids -- vehicles that get some electric range but are powered by a gasoline engine -- have also been falling in recent months, Wakefield pointed out. With falling sales of electrified vehicles, are V6 and V8 engines in vogue again?
"We will see cylinders go up and larger, more simple displacement engines," he explained. "Battery electric vehicles have to be competitive."
Ford-150 pickup trucks are displayed for sale at a dealership, March 24, 2025 in Austin, Texas.
Tyson Jominy, a vice president of data and analytics at JD Power, said certain brands, such as Stellantis, will build more vehicles equipped with V8 engines to satiate consumers who prefer the power. The CEOs of General Motors and Ford, however, are still committed to hybrids, and Ford is rolling out a smaller electric truck by 2028 that will reportedly cost $30,000.
The declining interest in EVs means companies like Telsa, Rivian and Lucid are enduring greater headwinds than traditional marques. Tesla, for example, is offering 0% financing on its Model Y SUV to spur sales.
"Direct-to-consumer brands are more desperate," Jominy told ABC News. "They will continue to have to find new consumers."
Tesla cars sit parked at a charging station, May 19, 2025 in San Francisco.
EV transaction prices have risen $8,000 since last fall, and dealerships are offering fewer discounts on EVs, Jominy said. Plus, volume has also been slashed dramatically, leaving consumers with fewer choices.
"The onus to build EVs is now gone. Manufacturers are reducing the amount of EVs they have to make, especially lower-priced ones," he said.
Valdez Streaty said it's not all doom and gloom for EVs. Success though depends on coming up with "compelling and affordable" products, she said, adding that the upcoming Rivian R2 could be a hit if the price stays around $45,000.
"We're in a K economy and 65% of EV models are over $60,000," she said. "Consumers are still worried about the price. Not many models are affordable, but we will get there. The world is going electric."
And there are reasons to be optimistic about EVs in the coming decade, Jominy said. The majority of EVs get more than 300 miles of range and many are equipped with the NACS charging port, which has become the industry standard. Charging infrastructure across the country continues to improve, he noted, reducing the need for giant battery packs (batteries account for 40% of the vehicle's cost on average).
"Range anxiety will no longer be the 'boogeyman,'" he quipped.
He added, "EVs are not going away. This is a big country with diverse needs and driving behaviors. Many consumers love the EV ownership experience."
