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It’s easy to assume that electric vehicles are starting to build traction in the United States.

After all, purchases of electric cars topped 1.2 million in the previous year, more than five times the number just four years earlier.

Hybrid sales have surged by a threefold.

Electric vehicles accounted for 10% of overall sales in August—a new high, according to industry data.

And, reports to shareholders this week from major automakers and additional companies all showed unprecedented EV sales over the past three months.

This represented a bright spot in an sector wrestling with the effects from still high interest rates and buyers concerned over inflation, import taxes, and the broader economic situation.

Analysts Identify a Temporary Surge

However market watchers say the boom was caused by a rush to purchase before the expiration of a federal incentive that helped knock as much as $7,500 off the price of certain electric and alternative fuel cars.

With that tax credit gone as of the end of September, carmakers are anticipating demand to decline sharply.

"We expect a vibrant industry, but it's going to be more limited, way smaller than we anticipated," a top industry leader said this week.

"We anticipate that electric vehicle interest is going to drop off sharply," another official added, saying it would take time to see how soon buyers would come back.

American Lags Behind International Uptake

Even with the recent gains, the US, the world's second biggest car market, appeared as a slow adopter in EV adoption relative to much of the rest of the world.

In the UK, for instance, purchases of electric and hybrid vehicles made up nearly 30% of vehicle purchases in the previous year, while in the European Union, they accounted for about 20% of 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 become the majority in the current year.

Take-up in nations like Norway and Nepal is higher still.

EVs tend to account for a lower percentage of sales in developing regions and other parts of Asia—but expansion there has been surging.

Policy Divergence

Observers note adoption in the US has been hindered by comparatively weak government support for the industry, which has restricted the types of subsidies, exchange schemes, and rules that have supported the sector in nations such as Europe and Asia.

Earlier leadership pushed hard to increase take-up, targeting for electric cars to account for half of total purchases in the United States by 2030.

Officials at the time tightened standards on pollutants, boosted demand through public sector acquisitions, encouraged manufacturers to invest with financial support for electric vehicle projects, allocated funds building charging stations, and expanded the $7,500 tax credit as a sweetener for buyers.

Advocates cast those efforts in part as a strategic necessity, cautioning that absent such measures American manufacturers would risk losing out to competitors from China and other countries.

However, the current administration has moved to eliminate several policies, including the $7,500 credit, claiming that they were pressuring people to buy vehicles they would not normally choose.

"We're saying ... you're not going to be required to make all of those cars," a leader said this summer, while signing legislation aimed at striking down regulations that would have phased out sales of gasoline vehicles in one state by 2035. "You can make them, but it'll be determined by demand, judged by the market."

Cost Is Still a Challenge

EVs have become more affordable in the US in the past few years—but they remain pricier than similar gasoline cars.

Moreover, automakers from China like BYD, which have made rapid inroads in international regions due to competitive pricing, have been effectively shut out of the US market, due to high tariffs targeting cars imported from China, supported by the last two administrations.

As of August, the average transaction price of an electric car in the United States was over $57,000, about 16% more than the average for all vehicles.

The least expensive battery car available, one popular model, is priced around $30,000. In contrast, several models can be found for less than £20,000 in the UK.

What’s Next

Experts say what buyers do next hinges on how automakers set prices in the months ahead, as they face not only the end of the subsidy but also tariffs on foreign cars and certain components introduced earlier this year.

A major manufacturer said recently it would counteract the loss of the tax credit by lowering the price for its lineup of EVs. But a competitor said the cost for leasing options of some of its cars would rise.

One industry analyst commented she did not anticipate to see most companies follow this approach, given the pressures from tariffs.

While some buyers may opt for EVs anyway, "next year is going to be hard," she cautioned, adding that her firm is calling for overall car sales to drop by roughly 2% in 2026.

"It would have been challenging if all you had to deal with is new tariffs, but with these taxes and the incentive going away, there's a double effect."

Spending Pullbacks

Carmakers had previously scaling back their investments in EVs.

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

"It's a big hit to the EV industry—it can’t be ignored," said one research analyst.

"The subsidies were originally a way to create fairness and now that they're removed the US has a significant progress to achieve."

Yet, a different expert said she was reluctant to label the US lagging in an industry still testing out different options.

"Is [electric] really the right thing?" she asked. "Calling the US a laggard presumes that this is the only and best solution and I think it's premature to say that."