US Auto Market Stumbles as Tax Credit Expiration Triggers Electric Vehicle Rout

American automotive sales faltered in early November as the electric vehicle sector reeled from October's policy-induced collapse, exposing the fragility of government-supported electrification whilst manufacturers recalibrate pricing strategies in the absence of federal subsidies.

Light vehicle sales declined 6.5 per cent to a seasonally adjusted annualised rate of 15.3 million units in October, marking the lowest sales pace in 15 months. The downturn followed President Trump's elimination of the $7,500 EV tax credit on 1 October, which sent electric vehicle sales plunging 24 per cent month-over-month to just 74,897 units.

Ford reported a 25 per cent year-over-year drop in all-electric sales, whilst Toyota sold merely 18 units of its bZ model in October, down from 1,401 units the previous year. The carnage reflected a predictable pattern: September's pre-deadline buying surge depleted dealer inventories whilst pulling forward demand that would otherwise have materialised in subsequent months.

Average transaction prices for new EVs climbed to $65,021 in October, up from $60,167 in September, suggesting manufacturers have absorbed much of the subsidy loss through tighter margins rather than passing full costs to consumers. Yet the strategy appears unsustainable. EV discounts are expected to average $11,869 in November, though this remains insufficient to offset the withdrawn federal support.

The broader implications extend beyond quarterly sales figures. European automotive production is forecast to contract 2 per cent in 2025 following a 5.1 per cent decline in 2024, with demand remaining stubbornly weak, whilst European factories are reportedly operating at just 55 per cent capacity amid heightened competition from Chinese manufacturers.

October's reckoning demonstrates that Western EV adoption remains heavily dependent on policy architecture—a vulnerability that Beijing, with its sustained industrial support, appears unlikely to share.