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You might think that electric vehicles are finally gaining traction in the US.

After all, purchases of battery-powered cars topped 1.2 million last year, more than five times the figure just a few years ago.

Hybrid sales have jumped by a threefold.

Battery-powered cars represented 10% of total sales in August—a record level, according to industry data.

And, updates to shareholders recently from major automakers and others all showed record electric sales over the past three months.

This marked a bright spot in an industry grappling with the effects from elevated interest rates and consumers concerned over rising prices, import taxes, and the broader economic situation.

Experts Point to a Short-Term Surge

However analysts say the surge was caused by a dash to buy before the expiration of a federal incentive that reduced as much as $7,500 off the cost of eligible electric and alternative fuel cars.

Now that the incentive has expired as of the close of last month, carmakers are anticipating momentum to shift into reverse.

"It's going to be a dynamic sector, but it's going to be more limited, way smaller than we anticipated," one automaker executive stated this week.

"I expect that EV demand is going to decline sharply," a senior official noted, explaining it would require time to see how soon buyers would come back.

American Lags Behind International Adoption

Despite the recent gains, the US, the second-largest auto market globally, stood out as a slow adopter in EV adoption compared to many other nations.

Across Britain, for example, purchases of battery electric and hybrid cars accounted for nearly 30% of new sales last year, while in Europe, they accounted for roughly one in five sales.

Across China, the world's biggest car market, adoption of such cars accounted for almost half of overall sales last year, and they are expected to exceed half in the current year.

Adoption in some other countries Scandinavian and Asian markets is even greater.

Electric vehicles tend to make up a lower percentage of sales in developing regions and other parts of Asia—but growth there has been accelerating rapidly.

Policy Differences

Observers say adoption in the US has been slowed by less robust federal backing for the industry, which has limited the kinds of incentives, trade-in programmes, and rules that have supported the sector in nations such as Europe and Asia.

The previous administration pushed hard to increase take-up, aiming for EVs to account for half of total purchases in the US by 2030.

Officials at the time strengthened standards on emissions, increased interest through public sector acquisitions, nudged manufacturers to put money with financial support for EV investments, allocated funds constructing EV infrastructure, and enhanced the $7,500 incentive as a inducement for buyers.

Advocates cast those efforts in part as a strategic necessity, cautioning that without these US carmakers would face disadvantages to rivals from abroad.

However, recent leadership has pushed to eliminate many of those measures, such as the $7,500 subsidy, arguing that they were pressuring people to purchase vehicles they would not otherwise choose.

"We're saying ... you're not going to be forced to make all of those cars," one official stated recently, while signing legislation aimed at striking down regulations that would have eliminated sales of petrol-only cars in one state by 2035. "You can make them, but it'll be determined by demand, shaped by consumer choice."

Affordability Is Still a Barrier

EVs have become more affordable in the US in recent years—but they still cost more than comparable petrol-powered vehicles.

Moreover, automakers from China like a leading brand, which have made rapid inroads in other markets due to low prices, have been largely excluded of the US market, due to import duties on cars made in China, backed by both administrations.

As of August, the average transaction price of an electric car in the US was more than $57,000, approximately 16% more than the average for all cars.

The most affordable EV on offer, a Nissan Leaf, costs about $30,000. By comparison, several models can be purchased for under £20,000 in the United Kingdom.

What’s Next

Experts say what consumers do next depends on how carmakers set prices in the coming months, as they contend with not only the expiration of the subsidy but also duties on imported vehicles and specific components introduced earlier this year.

A major manufacturer announced recently it would counteract the loss of the tax credit by reducing costs for its lineup of electric models. But a competitor said the price for monthly lease payments of some of its cars would rise.

A market specialist commented she did not expect to see many firms follow that example, given the challenges from import taxes.

While certain customers may choose EVs anyway, "next year is going to be hard," she warned, noting that the research group is projecting total car sales to fall by roughly 2% in 2026.

"It would have been challenging if all you had to deal with is recent duties, but with these taxes and the subsidy expiring, there's a double effect."

Investment Pullbacks

Carmakers had previously reducing their spending in electric cars.

Analysts say new regulations could further limit those investments even more.

"It's a big hit to the electric vehicle sector—it can’t be ignored," noted an industry expert.

"These incentives were originally a way to level the playing field and now that they're gone the US has a lot of ground to make up."

However, another analyst expressed she was hesitant to declare the United States lagging in an sector still testing out different options.

"Is [electric] really the right thing?" she asked. "Saying that we're behind presumes that EVs are the sole answer and I think it's premature to make that claim."