The U.S. government's authorized $7,500 tax credit for electric vehicle (EV) purchases is now officially no more (it ended Sept. 30). That created a significant pull ahead in EV demand as interested buyers raced to take advantage of the incentive on the available inventory. For automakers, it offered an opportunity to unload some inventory, because the last place any automaker wanted to be was loaded with excess EV inventory once October hit.
The good news is that Ford Motor Company (F -1.96%) and General Motors (GM -0.85%) both benefited from the added sales for the third quarter. Interestingly, they also found a way to perhaps extend the federal tax credit beyond the deadline through a clever program.
EVs surge ahead of anticipated slowdown
Because of the threatened loss of the $7,500 EV tax incentive, Ford's EV sales jumped 30% year over year to 30,612, good enough for a Q3 record. That result helped Ford's U.S. light vehicle sales jump 8.5% higher, divided between a 9.4% gain in the Ford brand and a 7.6% decline in Lincoln volume.
Ford noted that sales of its hybrid models also marked a Q3 record at 55,177 vehicles, including a healthy 10% gain for the F-150 hybrid. In fact, Ford said roughly a third of all F-150 sales are hybrids currently. That's interesting, considering that full-EV trucks have yet to really gain traction -- they're burdened by heavier and more costly batteries to power the larger vehicles.
Ford F-150 Lightning. Image source: Ford Motor Company.
It was a similar look for Ford's crosstown rival, General Motors, which posted U.S. light vehicle sales up 8% from the prior year, also with a strong EV result. In fact, GM set another EV sales record during Q3 with 66,501 deliveries, more than doubling Ford's EV sales result.
It's not a fluke for GM, despite the surge in demand from the expiring EV credit. The company's year-to-date EV sales in the U.S. are up 105% compared to the prior year, up to 144,668 vehicles. A chunk of that success is driven by the Chevrolet Equinox EV, which now stands as the best-selling non-Tesla EV in the U.S. market. Another winner was the Cadillac brand, which boasts three of the 10 best-selling EVs in the luxury segment through September -- the Lyriq (No. 2), the Optiq (No. 5), and the Vistiq (No. 6).
But what happens now?
Here's when things become a bit uncertain, with a severe slowdown anticipated for EV sales during the fourth quarter. "I wouldn't be surprised if the EV sales in this country go down to 5 percent of our industry, from probably this month 10, 12 percent," Ford CEO Jim Farley said, according to Automotive News. The truth is that the slowdown could extend beyond Q4 and slow the pace of EV adoption for years to come.
There's a bit of good news for Ford and GM investors, however. Both of the Detroit automakers managed to extend the $7,500 federal incentive on EVs into October by using their handy-dandy financing arms.
Essentially, Ford and GM used their finance arms to make down payments on an inventory of electric vehicles in September, even before finding customers, and are now passing the savings to customers in October (and maybe beyond) through leasing arrangements. This move works with IRS guidance that if a taxpayer acquires a vehicle with a written contract in place and payment made on or before Sept. 30, 2025 -- which in this case is true, albeit through the finance arms -- even if the vehicle is placed in service after the cutoff date, the taxpayer is entitled to claim the credit.
"We want to make sure that there's an extension of benefits that are out there," Andrew Frick, president of the automaker's Ford Blue and Ford Model-e divisions, told Automotive News at a conference in Detroit. "We have a certain amount of inventory in the market, and we wanted to make sure that we were setting up our dealers for success to run out through the rest of the year."
What it all means
Unfortunately, automakers currently find themselves in a bit of a tough spot with the EV industry. At a time when automakers are losing significant money on most EV sales, the government continues to roll back incentives and policies for EVs, which will delay the companies' efforts to build much-needed scale. For investors, this could mean hefty EV losses. Remember that Ford lost $5.1 billion with its Model-e division in 2024 alone.
However, the good news remains. Ford and GM can work down EV inventory ahead of the anticipated slowdown and concentrate on bringing costs down. This should improve affordability and charge infrastructure, while building scale for EVs.
