Americans Rush To Buy EVs Ahead of Subsidy Expiry

Sales of electric vehicles in the United States hit an all-time high in the third quarter. Normally a welcome piece of news for EV makers, the record was prompted by the end of tax incentives for EV buyers, which expired at the end of September. From now on, it’s likely to be bad news for car companies with EV plans.

Kelley Blue Book reported sales of electric cars in the quarter to September shot up by 40.7% on the previous quarter and by 29.6% on the year. This trend pushed the average car price for the third quarter of the year to over $50,000 for the first time, Bloomberg reported, noting that this aggravated an affordability problem in the car sector. The surge, however, was far from organic. It was mostly the result of the Trump administration’s policies that have involved rollbacks of most of the Biden administration’s emission reduction initiatives, notably the $7,500 tax credit for EV buyers.

The rush to buy EVs before the tax credit expired will likely show up on carmakers’ balance sheets: battery maker LG Energy Solution said it expected to book a 34% increase in profits for the third quarter, driven by the EV sales jump. Not only this, but third-quarter profit for the South Korean battery maker would have been a third of the actual expected sum had it not been in a position to benefit from Biden-era subsidies, LG Energy Solution also said in a regulatory filing, as quoted by Reuters.

This does not bode well either for EV battery makers or for EV makers. It suggests that with the subsidies gone, the industry would not be able to survive – and indeed, Ford’s chief executive recently issued a warning to just that effect.

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“I wouldn’t be surprised if EV sales in the US go down to 5%,” Jim Farley said at the end of September. It could end up being “way smaller than we thought.” Currently, EVs represent a 10^th of the U.S. car market, rising to 10.5% in the third quarter thanks to the record sales. Yet EVs are still losing money for most carmakers. Ford itself lost $1.3 billion on its EVs in the second quarter and has projected its total EV-related losses could hit $5.5 billion for the full year.

GM and Stellantis are also losing money on every EV they make, even though, per the latest Kelley Blue Book numbers, GM, along with Volkswagen, enjoyed a more than twofold increase in EV sales in the third quarter. Other carmakers, including Hyundai, Porsche, and Volvo, also saw their car sales jump considerably in the three-month period. Again, this is about to change.

Earlier this year, BloombergNEF predicted that the Trump administration’s policies in the EV space could reduce total sales until 2030 by as much as 14 million. Indeed, EV sales in the second quarter of the year actually slipped, even though incentives were still very much available to prospective buyers. So, EV battery makers, at least, are looking for new business opportunities.

“The market for grid-scale batteries and backup power isn’t just expanding, it’s becoming essential infrastructure,” a GM VP in charge of batteries, propulsion, and sustainability said recently. “Electricity demand is climbing, and it’s only going to accelerate. To meet that challenge, the U.S. needs energy storage solutions that can be deployed quickly, economically, and made right here at home. GM batteries can play an integral role. We’re not just making better cars — we’re shaping the future of energy resilience.”

Obviously, battery storage is one potential growth avenue for EV battery manufacturers, but it does not seem to be a very big avenue. One energy transition advocacy outlet has forecast that U.S. EV battery production could drop by 75% by 2030. New wind and solar installations are also slowing down because of Trump’s One Big, Beautiful Bill. It might be time to diversify in other directions for car and battery makers.

By Irina Slav for Oilprice.com

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