Abstract:
One year ago, on September 30, federal subsidies for electric vehicles expired in the United States. This car purchase credit of up to $7,500 has been like a ventilator in the past few years, maintaining the vital signs of the entire American electric vehicle industry. Now that the tube has been extubated, the market has reacted quickly. Data from Cox Automotive shows that in November last year, U.S. electric vehicle sales fell by more than 40% year-on-year.
This is simply a stampede in the electric vehicle industry.
At the same time, China was experiencing another kind of excitement. On the first day of the National Day holiday, 17.8 million new energy vehicle owners drove on the highway, and the charging capacity of national highways was 28.04 million kilowatt hours, a year-on-year increase of 60.4%, setting a record.
Global electrification in 2026 presents an almost split picture: the United States, which had planned to electrify half of its new cars in 2030, has turned its back on the car; on the other side of the Pacific, new energy vehicles continue to surge.
American new energy cannot be separated from subsidies
What role does the $7,500 subsidy play in the U.S. new energy industry? Let’s trace the source first.
In 2021, the Biden administration requires that electrified models account for half of new car sales in 2030. Then in 2024, the EPA tightened emissions rules.
The signal is now clear enough. General Motors has proposed selling 1 million electric vehicles by 2025, Ford is spending money to build factories, and battery factories are spreading from Michigan to Georgia. South Korea's LG and SK are also following their American partners in planning production capacity in wastelands.
New energy electric vehicles in the United States are beginning to shine. However, if subsidies are provided for a long time, it is easy for the industry to misjudge one's own constitution.
Now, Feng Shui has turned to the phase of withdrawing subsidies.
In July last year, the tax bill first abolished the $7,500 credit, announcing that it would expire on September 30, and also canceled the fines that car companies had to pay if they failed to meet fuel consumption standards. In September, new fuel economy standards were implemented, relaxing requirements for 2031 models to about 34.5 miles per gallon, compared with the Biden-era target of 50.4 miles per gallon.
Transportation Secretary Duffy called the day "a major victory for American autoworkers."
But the other account is not so good. Bloomberg New Energy Finance (BNEF) estimates that in the fourth quarter of 2025 alone, U.S. electric vehicle sales will decrease by about 24% year-on-year; the industry predicts that for the whole of 2026, sales will fall from about 1.5 million vehicles in 2025 to about 1.1 million vehicles, a decrease of about 29%.
General numbers are the most eye-catching. In the third quarter of 2026, Equinox EV sold only 1,905 units, down 92.4% year-on-year; Trailblazer EV fell 84.4%; Hummer EV fell 72.9%. Detroit's "Factory Zero" temporarily laid off about 360 people and halted some production lines.
Cumulative writedowns on the electric vehicle business of at least five car companies, including General Motors, Ford, Stellantis, Honda, and Porsche, have exceeded US$70 billion, which is close to the annual GDP of some medium-sized countries. GM will write down about 7.6 billion in 2025, and Ford will write down about 19.5 billion.
To simply attribute the reason to "Americans don't like electric cars" would be to take things lightly.
Automobiles are one of the industries with the longest industrial chain and the slowest return on investment. It takes five to eight years from the start of construction to full production for a battery factory, and the research and development of a vehicle platform depends on the sales of millions of units. Every time car companies make a bet, they are betting on the continuity of policies in the next ten years.
What the United States gives them is a coin that is tossed repeatedly.
In four years, the executive order has flipped from "Half Electric Vehicles by 2030" to the "End of Electric Vehicle Mandate", subsidies have been issued and then invalidated, and California's exemption card that has been used for decades to set stricter emission standards on its own has also been withdrawn by Congress. Car companies want to bet the entire factory before the coin falls.
Ford CEO Farley’s recent statement illustrates this dilemma. He said that Ford would cooperate with Chinese companies in areas where he does not control intellectual property rights, as well as in markets such as Europe and Southeast Asia that emphasize capital efficiency. In a change of topic, he reminded the United States to "learn from European lessons and be cautious about Chinese car companies entering the United States." He is also preparing for a new electric platform next year, including an electric pickup truck.
Cooperation and alert are carried out at the same time, and factory construction and project withdrawal are also carried out at the same time. What capital fears most is often not bad news, but not knowing whether things will change tomorrow. When expectations themselves become risks, the most rational choice is to hold tight to the wallet and survive first. As a result, factory construction is postponed, projects are frozen, and orders are cancelled. These actions reinforce each other.
What is even more darkly humorous is the ending of "de-Sinicization".
Washington’s idea is very straightforward, using tariffs and subsidies to move the battery industry chain from China back to the United States. Reality quickly gave feedback. A domestic battery assembly company in the United States just received a US$200 million loan from KKR in the fall of 2024. It entered bankruptcy court eight months later and laid off its employees from about 500 to 85. Its battery cells have to be imported from China, with lithium iron phosphate, and tariffs have been raised one after another, up to 150%, making the business impossible.
Ascend Elements, which was hailed as the "hopeful star" of independent batteries in the United States, filed for bankruptcy in April 2026. It has previously completed 12 rounds of financing, raised more than US$1.1 billion, and received more than US$600 million in grants from the Department of Energy. The list is still growing, and the entire battery recycling industry has fallen into a wave of bankruptcy; Ford and South Korea's SK On have split their partnership, one of the two Kentucky battery plants has been converted to energy storage, and the other has been postponed indefinitely.
These cases spell out a paradox. Electric vehicles in the United States rely solely on subsidies because they do not grasp the core value of the new energy industry. Taking batteries as an example, the more the United States wants to get rid of China in terms of batteries, the more it finds that it cannot get around it. Patents, production capacity, costs, and material systems, none of them can be completed within three to five years by printing money and administrative orders.
Industries nourished by subsidies are ultimately flowers in a greenhouse, and the U.S. market is no exception.
The boomerang of history
As time goes by, the United States actually has an old debt with electric vehicles.
At the beginning of the 20th century, electric vehicles were once common in the United States. Around 1900, there were many electric vehicles running on the streets of New York and Boston. They were quiet, clean, and did not require a crank to start. They once accounted for more than 30% of the U.S. motor vehicle market and were the first choice for the rich.
Later, the Ford Model T used the assembly line to drive down the price of fuel vehicles. In 1912, Cadillac installed an electric starter, and fuel vehicles no longer even had the hand-cranked barrier. Electric vehicles have been silent for more than half a century.
More than a hundred years later, the boomerang flew back, but the protagonist in the script was changed. What defeated American electric vehicles back then was cheaper and more convenient technology. Now, what is driving American electric vehicles back in the global market is still a cheaper and more mature industrial chain - but most of this industrial chain is now in China.
The penetration rate in the fourth quarter of 2025 makes the differentiation clear: China 49.3%, Germany 30%, Norway 84%, UK 36%, US 7%, Japan 2.1%. By September 2026, the retail penetration rate of new energy passenger vehicles in China will have reached 65.7%. Tesla's Shanghai factory contributes more than half of its global production. Even the production capacity of Model Y sold to Australia has been transferred from Berlin to Shanghai.
Europeans are more realistic. While Volkswagen is imposing additional tariffs on Chinese electric vehicles, it also has its battery company PowerCo and Guoxuan Hi-Tech sign an order of about 3.22 billion euros to jointly build lithium iron phosphate plants in Spain, Slovakia, and Morocco. If the wall is built, so must the business.
The United States chose to trade short-term car price declines for the growth period of the industrial chain. Whether this deal is a good deal or not will not be answered in the short term. Local car companies can indeed take a breather.
It’s just that the window of industry is often open for only a few years. It can temporarily shut down electric vehicles, but it cannot make the whole world stop and wait. Once the rules are written by others and the supporting equipment matures in the hands of others, if you want to return to the poker table, the price you have to pay will not be on the order of $930.
Subsidies should be withdrawn, and so should the virtual fire. But on the already surging river of electrification, stopping will never make people safer.
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