The abrupt discontinuation of government subsidies in the USA has thrown the electric vehicle market into disarray. The $7,500 tax credit for electric cars expired in September. October then dramatically illustrated just how artificially inflated the market had been. Major manufacturers experienced a dramatic drop in demand, and consumers turned back to conventional combustion engine vehicles. The automotive industry is facing a tough test, and the effects extend far beyond mere sales figures. Both the structure of the electric mobility market and consumer behavior are noticeably changing as a result of the altered subsidy policy. Suddenly, the dependence on subsidies and the genuine consumer trend are in stark contrast. (heise: 04.11.25)
Return to Market Reality Despite Government Subsidies
Ford invested billions in the development of electric models. But reality hit the company hard. Sales of electric cars plummeted by a quarter – to just 4,700 vehicles. At the same time, sales of combustion engine vehicles increased by 3.4 percent. This purchasing behavior demonstrates a clear customer preference for cheaper, more familiar technologies. The close link between sales and incentives is particularly evident since the US subsidy program expired. Without tangible financial relief, many buyers lack the final impetus to consider an electric car as sensible or economical.
The global automotive industry is also struggling to find new answers in the wake of this development. Innovation alone is not enough. It requires economic stability and a consumer base that offers more than just short-term incentives in terms of purchasing trends.
South Korea experiences the sharpest decline in the electric car market
Even more devastating signals are coming from the automotive industry in South Korea. The much-praised Hyundai Ioniq 5 lost almost two-thirds of its sales. Kia’s EV9 sales even plummeted to just 666 vehicles. Such figures illustrate that a large part of the demand was apparently generated solely by subsidies, not by genuine market dynamics. Without this support, the e-car sector loses its appeal.
Consumer behavior is thus proving to be pragmatic: If the price is not reduced by government subsidies, many buyers revert to combustion engine vehicles. And the trend towards more infrastructure for e-mobility also stalls without demand – a vicious cycle with international implications.
New consumer trend also affects market leaders
Tesla did benefit briefly from the last-minute rush before subsidies ended. Buyers quickly took advantage of the opportunity before the grants expired. But the euphoria may be short-lived. As soon as the tax breaks disappeared, orders also declined there. Even the market leader cannot cushion the downturn. For the former shooting star of the industry, this means that even prestige and technological dominance are not enough when consumer demand shifts.
Furthermore, experts see a paradigm shift. Corporations that have relied heavily on subsidies in the past will likely have to rethink their strategies. The business model of electromobility derives a large part of its growth from political funding – a risky foundation.
Warning signal for Germany
In Germany, politicians are discussing multi-billion-euro future investment packages, including those for e-mobility. But the US case shows how fragile this strategy can be. As long as demand relies on government subsidies, no lasting market stability will be achieved. For the German electric car market, this could mean: A reassessment of the subsidy policy before the next downturn occurs.