When the U.S. first rolled out its electric vehicle tax credits (expanded under the Inflation Reduction Act in 2022), they was supposed to last until 2032. As of Tuesday— September 30th, 2025 — that’s no longer the case.”
Donald Trump’s ‘Big Beautiful Bill’ has cut both the $7,500 tax credit for new EVs and the $4,000 tax credit for used EVs and has left the car industry scrambling to adjust. Some, like Ford and GM, are taking a short-term, creative approach. Both automakers are allowing their financing arms to purchase EVs from dealers, qualify for the tax credit and then, via leasing arrangements, pass on the benefit to their consumers. Meanwhile, others, have already started to curtail their EV activity in the U.S. Last week, Honda announced it was ceasing production of its Acura ZDX electric crossovers.
What does it mean for electric vehicles in the U.S.?
The original reason for the tax credit — and other accompanying EV incentives — was to close the affordability gap between battery electric vehicles and internal combustion engine (ICE) cars, and help accelerate EV adoption.
A recent consumer survey found that 59% of U.S. drivers cited price as the biggest stumbling block when it came to considering an electric vehicle. This is borne out by consumer behaviour this summer. Aware of the looming tax credit expiration, there were record EV sales in August — 146,332 new vehicles were sold, a nearly 18% year-on-year growth.
Now, minus the incentives, sales will drop. The question is, will it force a new approach to electric vehicles by car makers and what will that look like?
Comments by Jim Fairley, this week are telling. The Ford Motors CEO didn’t mince his words when it came to the impact on the industry — he believes demand for all-electric vehicles could be slashed in half next month — but he also stated:
“I think it’s going to be a vibrant industry, but it’s going to be smaller, way smaller than we thought.”
In this new world, luxury brands and imported brands that are subject to tariffs will suffer most but affordable EVs have a chance to cut through and could even reshape the market.
Beyond cost: the strategic opportunity for automakers
With subsidies being scaled back, automakers face a critical challenge: how to deliver affordable EVs while still creating value for consumers and sustaining momentum.
The answer lies not only in hardware efficiency, but also in rethinking the vehicle as a software-defined, connected platform.
- New revenue streams through digital services: Infotainment, advanced driver-assistance features, in-vehicle commerce and safety or convenience upgrades can provide subscription-based income beyond the initial vehicle sale, helping offset lower margins on affordable EVs.
- Smart energy and routing tools: Range anxiety remains one of the largest barriers to EV adoption. Connected systems that optimise charging stops, adapt to real-time traffic and maximise energy efficiency can both ease consumer concerns and differentiate offerings.
- Personalisation and stickiness: U.S. drivers are already demonstrating a higher willingness than other markets to pay for services that enhance safety, efficiency and convenience — 54% compared to 49% globally. This creates fertile ground for upsell strategies.
- Behavioural precedent: Roughly 25% of U.S. drivers have already paid for in-vehicle digital services, showing that consumers recognise the value of connectivity beyond the car itself.
In this model, the EV becomes more than a vehicle — it becomes a platform for ongoing engagement and monetisation. In this case, the current pullback on EV rollouts across the U.S. may not be entirely negative: it gives consumers more time to embrace the technology at their own pace, while giving automakers time to mature their platforms.
For automakers, the real opportunity now is to use this pause wisely: understand the true level of U.S. consumer demand for EVs and leverage SDVs and connected services to build affordability into their business models. This approach will not only help them weather the current climate but also ensure profitability long term.
