EV Discounts Surge Ahead of Tax Credit Expiration
The electric vehicle market is currently experiencing a dynamic phase, characterized by aggressive pricing strategies from major automotive manufacturers. With the looming expiration of the federal $7,500 tax credit for new EV purchases on September 30, 2025, companies are providing unprecedented incentives, often surpassing $10,000. This proactive approach is designed to stimulate demand and clear existing inventory, leading to a notable surge in sales as consumers rush to secure these benefits.
Many manufacturers are leveraging a leasing loophole that allows them to transfer the federal tax credit directly to buyers. Beyond this, a variety of additional discounts are being introduced, including lease cash, loyalty incentives, and conquest bonuses. These combined offers can result in total savings exceeding $10,000, and in some cases, even reaching $20,000. For instance, Honda is offering significant reductions on its 2025 Prologue model in most US regions, encompassing dealer and captive lease cash, along with loyalty bonuses and the federal tax credit. Similarly, Lucid recently provided substantial discounts on specific 2025 Air models. Major players such as GM, Ford, Tesla, and Hyundai are all participating in this trend, offering some of their most attractive EV promotions to date.
This period of intense discounting has fueled what is being termed an "EV selloff" over recent months. Market data indicates a sharp decline in the available supply of electric vehicles in the US. According to the latest Lotlinx data, EV supply dropped significantly from 99 days in June to 73 days in July, and further to just 59 days in August. This reduction is a direct consequence of automakers' efforts to liquidate inventory before the tax credit deadline. In contrast, the overall inventory of new vehicles across all powertrain types saw a slight increase, reaching 2.76 million units at the beginning of September. While hybrid vehicles remained in the shortest supply, followed by EVs, traditional internal combustion engine vehicles experienced an increase in supply.
Among the companies that regularly report monthly inventory figures, Volvo, Hyundai, Kia, Honda, and Subaru have successfully reduced their stock levels. Conversely, Ford and Mazda observed an increase in their supply. Toyota, despite maintaining relatively stable inventory levels, reported the tightest supply among all brands, with vehicle availability consistently below 30 days. Despite the recent consecutive record-breaking EV sales, General Motors has cautioned that the sales momentum is likely to decelerate once these "irrational discounts" are phased out. The company anticipates that it may take several months for the market to stabilize and adjust to the absence of these incentives, indicating a period of significant market recalibration ahead.
As the federal tax credit nears its conclusion, the automotive industry is navigating a critical period of transition. Consumers are actively engaging with the market, seeking to maximize savings on electric vehicles while the opportunity remains. Manufacturers are strategically adjusting their pricing and inventory management to adapt to the evolving regulatory and economic landscape. The coming months will likely see a continued rebalancing of the EV market as the impact of these temporary incentives diminishes, leading to new dynamics in supply, demand, and pricing.