The U.S. electric-vehicle industry has a looming problem that has nothing to do with politics or Tesla CEO Elon Musk. The issue: Used EV values. They point to slowing sales and lower prices in 2026, until things normalize.
Americans bought 310,839 EVs in the second quarter of 2025, down 6% year over year. Tesla sales dropped almost 13% to 143,535 vehicles. Its market share slipped 3.5 percentage points to 46.2%.
There is some hope for a temporary third-quarter rebound. The $7,500 federal EV purchase tax credit goes away in September, leaving car buyers a few more weeks to get in under the deadline. It will be far cheaper for someone to buy an EV on Sept. 30 than on Oct. 1.
After the credit is gone, EVs will simply be much more expensive to lease and purchase. Buyers might prefer to look for a deal on used EVs. Prices for those are, relatively, dirt cheap.
"Culture wars and range anxiety are often blamed for the EV slowdown," says RBC analyst Tom Narayan, adding investors should focus on used car prices. He found that late-model used battery electric vehicles could be bought for about 55%of their original sticker price. That number for internal combustion engine cars is closer to 75%.
A 2022 dual-motor long-range Model Y can be found on Cars.com Inc. or other car-buying platforms for about $25,000 to $30,000. That car started for about $50,000 new. Used EVs carry a discount of about 45% off new vehicles' price tags.
Part of the problem is the tax credit, explains Narayan. The original $50,000 price isn't the price that most car buyers have paid. Including state-level EV incentives, the original purchase price might have been closer to $40,000 or $42,000. With that as the starting price, the used car value declines don't look nearly as alarming.
That math, however, doesn't really help makers of EVs. Sales are "going to get worse," adds Narayan. Buying used is simply a better deal right now.
What's more, lowering the price of new EVs to help spur demand isn't easy when most EV makers lose money and tariffs are increasing costs for auto makers.
Ford is unusual among traditional auto makers in reporting the profitability of its EV division called Model e. In the second quarter, Ford's Model e segment lost $1.3 billion, or roughly $22,000 per car sold.
At the margin, selling fewer EVs is ultimately better for Ford and General Motors, says Narayan. That means they sell more internal combustion vehicles, where they make the most money. Narayan rates Ford stock Hold with an $11 price target for shares. He rates GM stock Buy and has a $63 price target.
Falling EV sales aren't great news for Tesla. Musk's car company is still the largest U.S. EV seller by far. Since the start of 2021, Tesla has sold 2.4 million EVs in the U.S., 55% of the total purchased by American car buyers looking to go green. Tesla didn't respond to a request for comment.
Narayan, however, rates shares Buy. His price target is $325. Most of the value in Tesla is tied up in its artificial-intelligence initiatives, he says. Tesla is using AI to train cars to drive themselves and to create humanoid robots. Tesla launched a roboataxi service in Austin, Texas on June 22. And Tesla hopes to start selling significant quantities of robots in 2026.
Before robots and the widespread adoption of self-driving cars, Tesla had to contend with EV sales. In July, Musk warned of some " rough quarters" ahead for his car company, partly because of reduced government support for EV purchases. If the used car market is any indication, "rough" might be worse than investors expect.