The shifting landscape of electric vehicle (EV) sales in the United States has sparked significant discussions lately, especially following the anticipated abolition of federal tax credits that have reportedly boosted the market for plug-in hybridsOver the past year, the adaptation to fluctuating policies and consumer sentiments has led to both growth and uncertainty in the sectorAccording to projections from Cox Automotive, the fourth quarter of 2024 is expected to witness a remarkable 12% increase in electric vehicle sales, bringing the annual total to a record high of 1.3 million units—an uptick from an 8% growth in the previous quarterNotably, plug-in electric vehicles hold about 8% of the U.Sautomotive market, a slight improvement from the previous year.

The flourishing sales of electric vehicles have had a positive ripple effect on overall automotive sales, which have increased when compared to the same period last year

Four researchers collectively predict that the annualized vehicle sales for 2024 could rise from 15.5 million units a year ago to 15.9 million unitsThe optimism surrounding these figures has raised eyebrows in a market that recently experienced considerable volatility due to inflationary pressure and supply chain disruptions.

However, industry experts forecast a slowdown in the growth of electric vehicle sales post-2024, which can largely be attributed to consumer reactions to anticipated policy changesNumerous buyers have expressed concerns over the likelihood of electric vehicles becoming increasingly expensive due to the potential elimination of tax incentivesAccording to JD Power's latest data, only 25% of new car buyers are considering electric vehicles for their next purchases, marking a decline of two percentage points compared to the previous year.

During a phone conference held in December of the previous year, Jonathan Smoke, chief economist at Cox Automotive, highlighted how "threats and worries" have spurred a sense of urgency among buyers

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This phenomenon is not limited to electric vehicles; it reflects broader purchasing behaviors in the automotive market overall.

As the political climate shifts, various presidential campaigns are targeting federal policies designed to encourage electric vehicle salesCritics have proposed scrapping the $7,500 tax credit for these vehicles, terming it "madness" and implying that it serves as an unnecessary burden on consumersSome advisors have suggested imposing tariffs on vehicles imported from Canada and Mexico, nations integral to America's automotive supply chainSuch moves threaten to further inflate vehicle prices, creating an atmosphere of uncertainty for prospective buyers.

In the bigger picture of the U.Snew car market, improvements in interest rates, increased manufacturer incentives, and dissipating consumer anxiety have drawn more buyers to showrooms, leading analysts to revise their annual sales forecasts upward

Early in 2024, prevailing concerns over inflation and cyberattacks targeting auto dealerships had cast a shadow over the market's prospects, making these recent positive turns notable.

Cox Automotive's data indicates that General Motors emerged as the top-selling automaker in the U.Slast year, delivering 2.7 million vehicles, followed closely by Toyota, Ford, Hyundai, and HondaContrarily, Stellantis slid to sixth place, experiencing a dramatic 15% drop in deliveries due to delays in product releases and inventory increases that ultimately led to the exit of its CEO.

On the electric vehicle front, while Tesla continues to lead in sales, the company faced its first annual decline in sales in over a decade, despite achieving record deliveries in the fourth quarterMeanwhile, JD Power's analysis revealed that players like General Motors, Honda, Hyundai, and Kia have captured a larger slice of the market share for electric compact and midsize SUVs in December, signaling shifting consumer preferences.

Jeff Schuster, GlobalData's vice president of automotive research, remarked that affordability remains a key hurdle for automobile sales compared to pre-pandemic levels

The much-anticipated average retail transaction price for new vehicles in the U.Sis on course to reach $46,258. With electric vehicles, high upfront costs pose the largest barrier for potential buyers, second only to the inadequacy of charging infrastructure.

With the current incentive structure, JD Power reports that electric vehicle purchasers are averaging a rebate of around $5,600 per vehicleEconomists emphasize the significance of such incentives, predicting a precipitous drop in demand—by as much as 27%—if these tax credits were eliminated.

Some manufacturers, like General Motors and Hyundai, have pledged to persist in providing electric vehicle offerings regardless of the policy shifts, while others have opted to prioritize hybrid models in their electric vehicle strategies, marking a noticeable resurgence in hybrid sales in 2024. Stellantis recently announced it would delay the launch of its all-electric Ram truck by a year, and Hyundai has committed to doubling its hybrid lineup