Over the course of the past year, there have been a number of legal and regulatory shifts in the electric vehicle space that have affected costs and incentives for consumers and manufacturers. In Congress, the One Big Beautiful Act ended four different consumer tax credits for EV chargers and vehicles and also zeroed out fines for non-compliance with CAFE standards, which had previously defrayed EV manufacturing costs. The Administration has also shaped EV deployment through their six month pause of the National Electric Vehicle Infrastructure (NEVI) program, changing tailpipe emissions standards, and most recently a proposed regulatory change to increase the Build America Buy America component requirements for electric vehicle chargers built with NEVI funds.

This current legal and regulatory approach has encouraged a shift in private sector electrification ambitions, and has created headwinds for EV deployment. However there may be other factors that end up being just as critical to the next decade of electric vehicle manufacturing both within and outside of the US. In particular, policymakers’ interest in enhancing US competitiveness with China, domestic manufacturing, and automotive innovation could also push the industry toward electrification.

US Electric Vehicle Industry Status Update

The US electric vehicle industry saw significant growth since the beginning of the IIJA, although that peaked in 2024. 2025, while still the second best year for EV sales in the US, fell behind 2024. In Q3 of 2025, electric vehicle sales in the US increased as buyers sought to make their purchases before the expiration of the EV tax credits. Q4 of 2025 was more difficult for the industry with light-duty EV monthly sales under 80,000, similar to mid-2022 levels. It is possible that some demand was shifted forward into Q3 due to the policy change.

It will be important to see the Q1 and following sales numbers from 2026 to better understand the impact of the loss of the credits. In 2025, US and European manufacturers Ford, General Motors, and Stellantis have had significant losses and have cancelled or reshaped investments in electric vehicle development. Globally, 2026 is predicted to be a year of slower growth for the EV industry, and overall auto sales are expected to remain flat. However, despite a step back in initial ambitions and projections for EV expansion, many automakers still view electrification as the future of the industry and as an area where they will need to continue to innovate, especially in driving down costs, in order to not fall behind in the next decade.

As covered by ETW, on February 12^th, the EPA revoked its vehicle tailpipe emissions standards and the agency’s 2009 endangerment finding which served as a basis for the Clean Air Act regulation of greenhouse gases. According to the EPA, the deregulatory action will be associated with $1.3 trillion in cost savings for Americans due to lower costs of new vehicles based on projections of lower vehicle prices and higher vehicle sales. (The repeal is currently being challenged in the D.C. Circuit by a coalition of health and environmental groups.)

For most automakers, there will be short term cost savings to the updated standards as they will not need to meet enhanced efficiency requirements for upcoming vehicle years or be required to purchase compliance credits. These U.S. automakers can maximize production of their highly-profitable diesel SUVs and pickup trucks. (For Telsa which only sells electric vehicles and is a seller of compliance credits, the repeal is a loss.) However, legal challenges to the ruling and future political changes could shift back to the previous standards. While automakers may save in the short term, in the longer term, as zero-emission vehicles become more cost competitive and see higher global demand, US automakers may be placed at a competitive disadvantage.

Competition with China

In the electric vehicle industry, China outpaces the US in cheaply manufacturing electric vehicles. Chinese manufacturers have been able to significantly bring down costs of their vehicles, including BYD’s $8,000 Seagull EV. Contributing factors to the lower price points for Chinese EVs include domestic industrial subsidies, internal competition, robust supply chains, and cheap labor. At the same time, 2026 is predicted to be a slower year in sales growth for EVs within China, and at the start of the year, the Chinese EV tax break was cut in half.

Currently US markets are closed to Chinese EVs so US automakers do not face that competition for domestic car buyers. In 2024, Canada—a major consumer of US manufactured vehicles— followed in the US’ footsteps by implementing a 100% tariff on Chinese electric vehicles. However, in January Canada allowed for the import of up to 49,000 Chinese EVs in a deal to bring down Chinese tariffs on Canadian canola seed. US Trade Representative Jamieson Greer and USDOT Secretary Sean Duffy criticized the deal, emphasizing protections for the US auto industry. Greer also said the Biden Administration’s January 2025 E.O. 14144 on cyber security protections (this E.O. was updated in June 2026 by the Trump Administration through E.O. 14306) as a barrier to Chinese vehicles being sold in the US. While Chinese manufacturers may not be able to sell in the US, their potential ability to dominate internationally could hurt US companies.

Maintaining domestic competitiveness with the Chinese electric vehicle industry has also been a contemporary concern for the European Union. A leaked version of the EU’s ‘Made in Europe’ rules for the auto industry in the European Commission’s Industrial Accelerator Act requires 70 percent of vehicles receiving EU subsidies to be manufactured in the EU. The exclusion of the battery from the total percentage and the exclusion of battery cells from battery pack content requirements emphasizes the Chinese dominance in global battery supply. There are mixed viewpoints of the content requirements, as German manufacturers which sell to China have raised concerns about retaliatory measures while French manufacturers have applauded the measures. Like the US, the European Union has also stepped back tailpipe emissions targets.

Another facet of international automotive competitiveness in the coming decade will be the autonomous vehicle industry. During hearings on autonomous vehicles in early 2026, members of Congress repeatedly expressed concern about ceding international leadership and market control to Chinese vehicle manufacturers. Autonomous vehicles are typically electric, and on February 18^th, Uber announced that it will invest $100 million in fast-charging stations in the US to support autonomous vehicle fleets. It will be important to watch the relationship between private investment in autonomous vehicles and their supporting infrastructure, including electric charging.

Domestic Affordability Crisis

US automotive cost competitiveness matters not only for international markets but also for the domestic market. A major focus for both Democrats and Republicans in 2025 and continuing into the 2026 midterm season has the been the cost of living crisis. Transportation is typically the second largest expense for families, after housing. In January, the Senate Committee on Commerce, Science, and Transportation planned but since postponed a hearing on US vehicle costs titled, “Pedal to the Policy: The Views of the American Auto Industry on the Upcoming Surface Transportation Reauthorization.” Chairman Ted Cruz’s (R-TX) memo released ahead of the hearing cited the costs of new vehicles doubling over the past 15 years. The memo pointed to new technologies and climate regulations as cost contributors.

Concerns about new vehicle affordability are not unfounded. According to data from Kelly Blue Book, in December 2025 the average cost for new vehicles purchased was $50,326, with the lowest priced new vehicle on the market now over $20,000. According to Cox Automotive analysis, in 2025 households making less than $75,000 made up 26% of the new vehicle market while they previously held 37% of the market in 2019. In comparison, households making over $150,000 per year made up 29% of the market in 2019 but now make up 40% of the new vehicle market.

There has also been a recent focus from US electric vehicle manufacturers on affordability. In August 2025, Ford announced plans to develop a $30,000 midsize electric pickup truck within the next year, with the company emphasizing affordability during their launch event. In October 2025 Telsa revealed lower cost versions of two of its popular Model 3 and Model Y vehicles priced at $38,630 and $41,630.

While electric vehicles typically have higher upfront costs, savings for electric vehicle owners can be found when looking at taxes and fees, insurance, fuel, maintenance and repairs, and resell value. According to analysis from Atlas Public Policy, electric vehicles have lower seven-year ownership costs over a seven-year lifetime than comparable diesel vehicles, with the exception of pickup trucks. The analysis found electrification cost savings ranging from $2,000 for compact sedans to $8,000 for mid-size SUVs.

In 2024, when the Environmental Protection Agency released its updated tailpipe emissions standards for model years 2027 to 2032, the agency estimated that the improved vehicle emission standards comparing a 2032 vehicle to a 2026 vehicle would save $6,000 in fuel costs over the course of the vehicle’s lifetime. These cost savings estimates vary significantly based on the price of fuel—as oil prices rise as they have this month, the long-term potential savings for electric vehicles increase dramatically.

The economics of electric vehicles for households are also influenced by Congressional action. The expiration of the Inflation Reduction Act’s EV vehicle tax credits in the One Big Beautiful Bill Act, removed a $7,500 subsidy for the purchase of domestic EVs. Congress has debated imposing an electric vehicle fee. According to analysis by Evergreen Action, a proposed one-time $1,000 fee and annual $250 registration fee would result in 7.3 million less battery electric vehicles and 400,000 less hybrid vehicles sold over the next two decades.

Conclusion

The health of the US electric vehicle industry is relevant to several bipartisan areas of concern for lawmakers including affordability, domestic manufacturing, competition with China, and innovation. The industry is currently at an inflection point with phased out tax credits, changing emissions standards, shifting manufacturing timelines, and differing responses from international allies to the influx of low-cost Chinese produced electric vehicles. Autonomous vehicle deployments may also add to demand from the private sector for electric vehicles. Even as the current Administration has shifted away from emissions reductions focused policies, US vehicle manufacturers must contend both with short term changes in the regulatory space, overall demand for both diesel and electric vehicles, and their ability to remain competitive on the international stage in the coming decade.