Experts are sounding the alarm for electric vehicle stocks like Rivian (RIVN 1.20%), Lucid Group (LCID -4.29%), and Tesla (TSLA 2.58%). I've written recently about how all of these companies will lose a critical profit source in 2026. Automotive regulatory credits -- which previously brought in billions in "free" profit industrywide -- now have essentially zero value due to regulatory changes. But there's another challenge that Rivian, Lucid, and Tesla will soon face that could be even more damaging.

Demand for electric vehicles could be "dreadful" in 2026

According to research published in The New York Times, electric vehicle sales are expected to be "dreadful" next year. The demise won't wait until 2026 to begin, however. "Sales of electric models are expected to plummet in the last three months of the year and then remain sluggish for some time," the article concludes.

The primary cause is clear: Earlier this year, the U.S. government eliminated tax credits for EV purchases. Because the tax credits expired at the end of September, many consumers raced to buy their vehicles before the deadline in order to lock in their financial incentives.

Previously, tax credits effectively reduced the cost of buying an EV by up to $7,500. A $55,000 vehicle, therefore, would essentially cost just $47,500. That's a big deal. Recent polling suggests that nearly 70% of American consumers want their next car to cost under $50,000.

When tax credits and other subsidies were reduced or eliminated in other countries, demand promptly fell off a cliff. That was the case for Germany in 2023, as well as Canada in 2025. Much of this demand slump will simply be due to a lumpy order book. Buyers who would have purchased in January 2026, for instance, may have accelerated their purchase to September 2025.

Investors should, therefore, be very skeptical about improving demand figures posted this upcoming quarter. The quarter that follows may, as the New York Times warns, generate "dreadful" sales growth rates.

Don't give up on Rivian, Tesla, or Lucid just yet

EV makers like Rivian, Tesla, and Lucid may have a rocky few quarters ahead. But that doesn't mean investors should ditch these stocks en masse. Long term, EV adoption is still expected to rise.

You may, however, want to conduct some asset reallocation based on this information. The company that will arguably be hit the least when it comes to eliminated tax credits for EV purchases is Tesla. It may see pressure on sales growth, but it has reliable access to capital. This will allow it to continue to invest in high-growth opportunities like robotaxis, as well as push to get a long-awaited $30,000 model to market. At that price point, these models will likely be cheap enough to see robust demand despite the absence of federal tax credits.

Rivian, meanwhile, is set to get its first affordable model to market: the R2. Two cheaper models -- the R3 and R3X -- are set to follow the R2, which is expected to begin production early next year. The R2 is expected to debut at $45,000. Even without incentives, that's below the $50,000 price point most buyers are targeting.

Lucid faces the most difficult road. The company has teased more affordable models for years, but the most aggressive timeline calls for production to begin by December 2026. Due to financial constraints and ancillary investment in other opportunities like robotaxis, it may take several more years to bring more affordable models to market. In a world where buyers are increasingly cost conscious, Lucid may struggle in a competitive landscape bereft of tax credits.

EV makers face a difficult road ahead. But opportunities remain. Instead of ditching the industry altogether, investors may be wise to simply reallocate their bets to the companies best positioned to succeed in new conditions.